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2007 Comprehensive Annual Financial Report CITY OF SPOKANE VALLEY Comprehensive Annual Financial Report December 31, 2007 City of Spokane Valley, Washington Comprehensive Annual Financial Report - Fiscal Year 2007 Financial Section City of Spokane Valley, Washington Comprehensive Annual Financial Report - Fiscal Year 2007 This page is intentionally blank. City of Spokane Valley, Washington Comprehensive Annual Financial Report - Fiscal Year 2007 Management's Discussion and Analyses City of Spokane Valley, Washington Comprehensive Annual Financial Report- Fiscal Year 2007 This page is intentionally blank. CITY OF SPOKANE VALLEY MANAGEMENT'S DISCUSSION AND ANALYSIS For the Year Ended December 31, 2007 As management of the City of Spokane Valley, Washington, we offer readers of the City's financial statements this narrative overview and analysis of the financial activities of the City for the fiscal year ended December 31, 2007. We encourage readers to consider the information presented here in conjunction with additional information that we have furnished in our letter of transmittal. All amounts in this discussion and analysis,unless otherwise indicated, are expressed in thousands of dollars. This discussion contains comparative analysis based on information from the prior year. • FINANCIAL HIGHLIGHTS The key restated financial highlights for 2007 are as follows: At the end of the current year, the City's governmental activities reported a combined ending net asset balance of$88,331 thousand. A total of 52.4% or 46,314 thousand of total net assets is invested in capital assets, such as streets, land, and buildings. Of the remaining net assets, $42,022 thousand is available to meet the government's ongoing activities and obligations. At the end of the current year, unreserved fund balance in the Statement of Revenues, Expenditures and Changes in Fund Balance for the General Fund was $13,752 thousand, which represents a $5,041 thousand or 57.8% increase from the prior year, and 52.8%of total General Fund expenditures. The increase in unreserved fund balance is primarily explained by significant unanticipated revenues received and lower expenditures near year end. Total City debt decreased by $1,406 thousand to $9,091 thousand during the current fiscal year primarily due to scheduled debt principal payments and extinguishing capital debt from the prior year. Governmental fund balances at year end were$42,022 thousand. OVERVIEW OF THE FINANCIAL STATEMENTS This annual report consists of a series of financial statements. These statements are organized so the reader can understand the City as a financial whole or as an entire operating entity. The statements also provide a detailed look at specific financial conditions. The following discussion and analysis are intended to serve as an introduction to the City's basic financial statements. 1 The City's basic financial statements are comprised of three components: the City-wide financial statements, fund financial statements, and notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. These various elements of the Comprehensive Annual Financial Report (CAFR) are related as shown in the graphic below. Organization of the City of Spokane Valley's Comprehensive Annual Financial Report as illustrated: Introductory - INTRODUCTORY SECTION Section Management's Discussion and Analysis Government- wide Financial Fund Financial Statements Statements Governmental Proprietary Funds Funds Statement of net assets Balance Statement of Sheet net assets Financial Statement of Statement of Section revenues,expenditures, revenues,expenses and changes in and changes in Statement of fund balances fund net assets activities Budgetary comparison Statement of cash statement flows Notes to the Financial Statements Required Supplementary Information Other Than MD&A Information on individual non-major funds and other supplementary information that is not required Statistical STATISTICAL SECTION Section The following.figure summarizes the major features of the financial statements. This overview section below also describes the structure and contents of each of the statements in more detail. Government-wide Fund Financial Statements Statement Governmental Proprietary Entire entity The day-to day operating The day-to day operating (except fiduciary funds) activities of the City activities of the City Scope for basic governmental for business-type services enterprises Accounting Accrual accounting and Modified accrual and Accrual accounting and basis and economic resources current financial resources economic resources focus measurement focus measurement focus focus - All assets and liabilities, Current assets and liabilities All assets and liabilities, Type of asset both financial and that come due during the both financial and capital, and liability capital,short-term and year or soon thereafter; short-term and long-term information long-term capital assets and long-term liabilities All revenues and Revenues when cash is All revenues and expenses Type of inflow expenses during year, received during the year or during year,regardless of and outflow regardless of when cash soon thereafter;expenditures when cash is received or information is received or paid when goods or services have paid been received and the related liability is due and payable i 2 GOVERNMENT-WIDE FINANCIAL ANALYSIS The government-wide financial statements are designed to provide readers with a broad overview of the City's finances,in a manner similar to a private-sector business. Statement of Net Assets and Statement of Activities The statement of net assets presents information on all of the City's assets and liabilities,with the difference between the two reported as net assets. This statement is similar to the balance sheet from the business private sector. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of the City is improving or deteriorating. The statement of activities presents information showing how the City's net assets changed during the current year. This statement distinguishes revenue generated by specific functions, from revenue provided by taxes and other sources not related to a specific function. Revenue generated by specific functions (charges for services, fines and forfeitures, grants and other contributions) is compared to the expenses for those functions to demonstrate how much each function either supports itself or relies on taxes and other general funding sources for support. These statements are prepared using the accrual basis of accounting similar to the accounting method used by private sector companies. This basis of accounting takes into consideration all of the current year's revenues and expenses,regardless of when the cash is received or paid. The change in net assets is important because it tells the reader whether, for the City as a whole, the financial position of the City has improved or diminished in capacity. However,in evaluating the overall position of the City, nonfinancial information such as changes in the City's tax base and the condition of the City's capital assets will also need to be evaluated. In the statement of net assets and the statement of activities,the City is divided into two kinds of activities: Governmental Activities—Most of the City's programs and services are reported here, including general government, public safety, physical environment, transportation, economic environment, and culture & recreation. These services are funded primarily by taxes and intergovernmental revenues,including federal and state grants and other shared revenues. Business-Type Activities—These services are provided on a charge for goods or services basis to recover all or most of the cost of the services provided. The City's Stormwater Utility Management Fund activity is reported here. Fund.Financial Statements A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objects, and a fiscal accounting entity with a self- balancing set of accounts used to account for specific activities. The City, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance- related legal requirements. All the funds of the City can be di ided nto provide detailed rn govemental fund types, and proprietary fund types. about the City's major funds. Based on the restriction of the use of resources and money,the City has established many funds that account for the multitude of services provided to our residents. Governmental Funds — Governmental funds are used to account for essentially the same functions reported as governmental activities on the government-wide fmancial statements. Most of the City's basic services are reported in these funds that focus on how money flows into and out of the funds and the year end balances available for spending.These funds are reported on the modified accrual basis of accounting that measures cash and all other financial assets that can be readily converted to cash. The governmental fund statements provide a detailed short-term view 3 of the City's general government operations and the basic services being provided, along with the fmancial resources available. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities on the government-wide financial statements. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The City maintains a multitude (eighteen) of individual governmental funds. Information on the City's seven major governmental funds; General Fund, Street Fund, Service Level Stabilization Reserve Fund, Capital Projects Fund, Special Capital Projects Fund, Street Capital Projects Fund, and Civic Buildings Capital Projects Fund are presented separately in the governmental fund balance sheet and the governmental funds statement of revenues, expenditures, and changes in fund balances. Data from the other governmental funds are combined into a single, aggregated presentation. Individual fund data for each of these non-major governmental funds is provided in the form of combining statements elsewhere in this report. Proprietary Funds—The City has two types of proprietary funds. Enterprise funds are used to report the same functions presented as business-type activities in the government-wide statements with the fund statements providing more detail then reported in the government-wide statements. Enterprise funds are used to account for goods and services provided to the citizens. The City provides information on its enterprise fund, the Stormwater Utility Management fund (a major fund). The City's Internal Service Funds; Equipment Rental and Replacement and Risk Management accounts for the accumulated and allocated internal costs of fleet vehicles, computer equipment, and insurance claims. Also, both provide internally for the goods and services among the City's various departments. These Internal Service funds assets and liabilities are predominantly governmental in nature and have been included in the column under governmental-type activities on the government-wide financial statement of net assets. Notes to the Financial Statements The notes provide additional information that is essential to a full understanding of the data provided on the government-side and fund financial statements. The notes are located immediately following the basic financial statements. Other Information In addition to the basic financial statements and accompanying notes, this report also presents combining and individual fund statements and schedules for other governmental and internal service funds. GOVERNMENT-WIDE FINANCIAL ANALYSIS Statement of net assets (restated) —The statement of net assets can serve as a useful indicator of the City's financial position. The City of Spokane Valley's financial position retracted slightly during the year ended December 31, 2007, as net assets decreased by $81 thousand.Net assets at � December 31,2007 totaled$91,053. The following table summarizes and compares the City's net assets for 2007 and 2006: 4 i Table 1 City of Spokane Valley's Net Assets,as restated (amounts in 000) tal Governmental Business-type TTotal Change Total Total Activities Activities 2 200 2007 2007 2006 2007-2006 2,189 $ 1,756 $ 50,199 $ 40,385 $ 48,010 $ 38,629 $ 328 54,361 64,52 Current and assets(nrt of de 53,676 64,201 685 -0.3% Capital assets(net of depreciation) 101,686 102,830 2,874 2,084 104,560 104,914 Total assets - 9,091 10,502 -13.4% 9,091 10,502 - 4,416 0,50 Other liabilities outstanding 4,264 3,135 152 143 -2.0% O Tot ll liabies 152 143 13,507 13,780 Total liabilities 13,355 13,637 Net assets -13.3% Invested in capital assets, 685 327 46,999 54,197 21.5% 46,314 53,870 16,230 13,358 net of related debt 16,230 13,358 - 1,614 16 230 13 358 21.5% Unrestricted 25,788 21,965 ' 2,036 1, Unrestricted 91,053 $ 91,134 -0.1% Total net assets $ 88,332 $ 89,193 $ 2,721 $ 1,941 $ As noted earlier, the City's net assets, when reviewed over time, may serve as a useful indicator of the City's financial position. In this case,the Primary Governments assets exceeded liabilities by $91,053 thousand ($88,332 thousand in governmental activities and $2,721 in business activities) as of December 31, 2007. By far, the largest portion of the City's net assets $46,999 thousand, 51.6%,reflects its investment in capital i al assets than g.,land and machinery impro mennd buildings and building improvements, improvements equipment, vehicles, and infrastructure) less any related debt used to acquire those assets that is still outstanding. The City uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City's investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources since the capital assets themselves can not be used to liquidate these liabilities. The majority of these assets were donated by Spokane County at the time of incorporation. A portion of City of Spokane Valley's Primary Government's net assets, $16,230 thousand or 17.8% represents resources that are subject to restrictions on how they can be used. The remaining balance of unrestricted assets, $27,824 thousand 30.6%may be used to meet the city's ongoing obligations to citizens and creditors. At the end of the current fiscal year, the City is able to report positive balances in all three categories of net assets, both for government as a whole, as well as for its separate governmental and business-type activities. The same situation held true for the prior fiscal year. Changes in net assets- The changes in net assets table illustrates the increases or decreases in net assets of the City resulting from its operating activities. The City of Spokane Valley's net assets decreased approximately $81 thousand in 2007. Table 2 shows revenues, expenses, related changes in net assets in tabular form for both governmental and business type activities. 5 Table 2 Changes In City of Spokane Valley's Net Assets as of December 31,2007 and 2006,as restated (amounts in 000) Governmental Business-type Percentage .Activities Activities Total Change Revenues 2007 2006 2007 2006 2007 2006 2007-2006 Program revenues Charges for services $ 5,610 $ 4,360 $ 1,658 $ 1,558 $ 7,268 $5,918 22.8% Operating grants&contributions - - - - - - 0.0% Capital grants&contributions 3,077 8,039 - - 3,077 8,039 -61.7% General revenues Property taxes 7,186 8,727 - - 7,186 8,727 -17.7% Sales taxes 19,638 18,842 - - 19,638 18,842 4.2% Other 8,241 5,365 107 58 8,348 5,423 53.9% Total revenues 43,752 45,333 1,765 1,616 45,517 46,949 -3.1% Expenses General government 4,893 4,903 - - 4,893 4,903 -0.2% Public safety 16,289 15,742 - - 16,289 15,742 3.5% Physical environment 1,573 1,485 - - 1,573 1,485 5.9% Transportation 16,788 13,260 - - 16,788 13,260 26.6% Economic environment 2,259 1,867 - - 2,259 1,867 21.0% Culture and recreation 2,415 1,884 - - 2,415 1,884 28.2% Interest on long term debt 411 409 - - 411 409 0.5% Stormwater management - - 970 1,102 970 1,102 -12.0% Total expenses 44,628. 39,550 970 1,102 45,598 40,652 12.2% Excess before special items and transfers (876) 5,783 795 514 (81) 6,297 -101.3% Gain on sale of assets - - - - - 0.0% Transfers In (out) 15 30 (15) (30) - - 0.0% Increase(decrease) net assets $ (861) $ 5,813 $ 780 $ 484 $ (81) $6,297 -101.3% Governmental Activities-Charges for services program revenues increased overall by$1,250 thousand, or 28.7%for the current year. This was one of the two largest sources of program revenue for the City, accounting for$5,610 thousand or 12.8 % of total governmental revenues. These charges are for fees for building, community development, and construction permits, fees associated with the collection of property taxes,fines and forfeitures related to public safety activity, and licenses and permits. I The City's grant revenues from Federal and State sources made up $2,728 thousand or 6.2 % of total governmental revenues. The major recipients of intergovernmental program revenues were the Public Works,Planning and Community Development and Culture and Recreation. Property tax revenues in the governmental funds account for $7,186 thousand of the $43,746 thousand total revenues for governmental activities, or 16.4 % of total revenues, and the general fund property tax revenues decreased by$1,541 thousand or 17.6%. Sales Tax accounted for approximately $19,638 thousand or 44.9 % of total revenues in year 2007, the largest single source of program revenue for the City of Spokane Valley. Other taxes received were real estate excise taxes of $2,537 thousand, Gambling taxes of $829 thousand, Hotel/Motel and Motor Fuel taxes of$2,566 thousand, and collection of other Excise taxes of $413 thousand. The Public Safety function accounted for $16,289 thousand of the $44,622 thousand total expenses for governmental activities, or 36.5 % of total expenses. The next largest function was Transportation, accounting for $16,788 thousand and representing 37.6 % of total governmental expenses. I 6 ii For governmental activities, the following table indicates the total cost of services and the net cost of services. The statement of activities reflects the cost of program services and the charges for services, sales tax, grants, and other contributions offsetting those services. The net cost of services identifies the cost of those services supported by tax revenues and unrestricted intergovernmental revenues. Table 3 Net Cost of City of Spokane Valley's Governmental Activities as of December 31,2007 and 2006,as restated — (amounts in 000) Total Cost Percentage Net Cost Percentage of Services Change of Service Change 2007 2006 2007-2006 2007 2006 2007-2006 General government $ 4,893 4,903 -0.2% $ 3,587 $ 3,956 -9.3% Public safety 16,289 15,742 3.5% 15,652 15,159 3.3% Physical environment 1,573 1,485 5.9% 1,573 1,485 5.9% Transportation 16,788 13,260 26.6% 14,060 5,220 169.3% Economic environment 2,259 1,867 21.0% (262) (386) -32.1% Culture and recreation 2,415 1,884 28.2% 920 1,308 -29.7% Other 411 409 0.5% 411 409 0.5% Total $ 44,628 $ 39,550 12.8% $ 35,941 $ 27,151 32.4% The general governments total net cost of services increased by $8,790 thousand, or 32.4% compared to the prior year. These governmental expenses are funded from property taxes, sales taxes, and intergovernmental revenues. Also, charges for services and operating grants program revenues of$8,687 thousand (19.5 % of the total costs of services) are used to fund the general government expenses of the City. (See Table 3 above) Figure 1: Program Revenues and Expenses-Government Activities Program Revenues and Expenses - Governmental Activities 35,000,000 - . . 30,000,000 — 25,000,000 20,000,000 — - Y o Program rovoneos. '15,000,000 -- c - -' aProg ram expensos '.I 1_: 10,000 000 — . 5,000 000 — - -=: 0 !r 1 �rfvgrJ,. if 014#4 C ^t t�60e C t `,0C �Ao a`lG • tie��P o 8-,N `el 0 elir Ant �c d) 7 The Transportation capital grants decreased in the current year by $5,311 thousand; these contributions are used to fund the on-going general government capital expenditures of$2,836 thousand,or 8.1 %of the total for governmental expenditure activity(see figure 1 and JA). As of December 31, 2007, Sales Tax accounted for approximately$19,638 thousand or 44.9% of total revenues in year 2007, the largest single source of program revenue for the City of Spokane Valley. Other taxes received were real estate excise taxes of$2,537 thousand, Gambling taxes of $829 thousand, Hotel/Motel and Motor Fuel taxes of$2,566 thousand, and collection of other Excise taxes of$413 thousand. Figure 1A: Revenues by Source-Government Activities interest& Charges for investment r- services earnings 12% Excise 5% Capital grants taxes 1% and contributions 10% Property taxes 21% Sa/es &Other taxes 51% Business-Type Activities The net assets for business-type activities increased by $780 thousand during 2007; accounting for an increase of$296 thousand compared to last year of the overall change in Net Assets. For the current year, business-type major program revenue source was charges for service of: $1,658 thousand. Operating expenses were$416 thousand under budget projection(see figure 2). Figure 2: Program Revenues and Expenses-Business Type Activities Program Revenues and Expenses - Business-type Activities $2,000 ® Program .•.,s.%L ' ' ' • revenues IN Program r:,`sr:"� �� Storm water management 8 Figure 3: Revenues by Source-Business Type Activities Interest and irivestnnent Miscellaneous earnings N 1% 5% ` .glkt f�: � Charges for services 94% The accumulated net assets of the Business-Type Activities — Stormwater Management Fund have a Net Asset balance of$2,721 thousand, an increase of$780 thousand. Thepmar nso source of revenue is a Stormwater management fee imposed upon real property (see figure Page). FINANCIAL ANALYSIS OF THE CITY OF SPOKANE VALLEY'S FUNDS As noted earlier, the City of Spokane Valley uses fund accounting to ensure and demonstrate compliance with fmance related legal requirements. Governmental Funds The focus of the City's governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City's requ the acing net ire available ment s In rs for particular, unreserved f edd balance of the may serve as a useful measure of As of December 31, 2007, the City's governmental funds reported a combined ending fund balance of $42,022 thousand, a net increase of$10,517 thousand in comparison with the prior year. Approximately 61.4 % of this total or $25,788 thousand is unreserved fund balance, which is available for spending at the City's discretion. The remainder of the fund balance is reserved; approximately 38.6 percent ($16,230 thousand), to indicate that it is not available for new spending because it has already been committed for a variety of restricted purposes. The General Fund is the primary operating fund of the City of Spokane Valley with all receipts and payments of ordinary city operations are processed, unless those processes require another fund to account for those operations. Sales taxes are the major revenue source. At the end of 2007, unreserved fund balance was $13,752 thousand. As a measure of the General Fund's liquidity, it may be useful to compare both unreserved fund balance and total fund balance to total governmental-wide activity expenses($44,628 thousand, see total cost of services 2007 table 43). General Fund unreserved fund balance represents 52.8 percent •of total General Fund expenditures. 9 Major Governmental Funds The General Fund—net change in fund balance increased by$5,041 thousand for the fiscal year ending December 31, 2007. A key factor in this increase was general expenditures were under budgeted expenditure amounts and revenues exceeded projections by $1,193 thousand primarily from increased sales tax revenues. Expenditures were $8,599 thousand less than budget primarily in the area of general government functions. The Street Fund—has a fund balance of$3,719 thousand, a decrease of($975) thousand for the year. The primary source of revenue for the Street fund is motor fuel taxes. Road maintenance cost and other project expenditures increased from the prior year. The Service Level Stabilization Fund— has a fund balance of $5,243 thousand. The primary source of funding for the Service Level Stabilization fund is transfers from the General Fund which was approximately$361 thousand for 2007. The Capital Projects Fund — has a fund balance of $4,447 thousand, an increase of $959 thousand for the year.The primary source of revenue for capital projects fund is real estate excise tax,which was approximately$301 thousand over original budget projections. The Special Capital Projects Fund — has a fund balance of $5,136 thousand, an increase of $1,422 thousand for the year. The primary source of revenue for this fund is the real estate excise tax, which was approximately$289 thousand over the original budget projections. The Street Capital Projects Fund— has an ending negative fund balance of($120) thousand. Construction costs were approximately $1,030 thousand for the year and grant revenue was $3,510 thousand less than budgeted. Theses projects were mostly funded with grants funds and transfers from other City Funds. The Civic Buildings Capital Projects Fund—has a fund balance of$5,782 thousand, an increase of $3,139 thousand compared to the prior year. Debt service costs were approximately $873 thousand.Funding was in a large part due to transfers from other City funds. Enterprise Funds The City's enterprise fund, Stormwater Management provides the same type of information found in the government-wide financial statements, but in more detail and is also a major fund. Unrestricted net assets of the Stormwater Management Fund at December 31, 2007, were $2,036 � thousand. Unrestricted net assets increased by $423 thousand for the year. Operating expenses were $416 thousand under final amended budget. BUDGETARY HIGHLIGHTS By State law, Title 35A of the Revised Code of Washington (RCW)requires all cities to prepare and adopt a balanced budget prior to the beginning of the City's fiscal year; the annual operating budget for the City is effective the first day of January. The City Council amended the original budget revenue and expenditures during 2007. These amendments have recognized additional j unrestricted fund balances carried over from the prior year of 2006, service charges from building and planning fees, grant proceeds, and additional sales tax receipts. Expenditure appropriations increased for major street projects, parks capital improvements, civic building capital projects, extraordinary winter weather operations, and continuation of reserves for the service level stabilization fund. For the General Fund, the change from the original to the final amended 10 budget was a net change in expenditures of $5,433 thousand and a net change in revenues of $2,067 for 2007. The majority of the increases in the budget occurred from the increase in sales taxes, and higher than anticipated charges for services revenues. CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets: The City of Spokane Valley's investment in capital assets for its governmental and business type activities as of December 31, 2007, amounts to $53,676 thousand (net of depreciation). This investment in capital assets includes land, buildings, improvements, machinery and equipment, and construction in progress (see Table 4, following). The total decrease in the city's investments in capital assets for the current fiscal year (including depreciation, additions and deductions) was (21.6) % (16.4 percent decrease for governmental activities and a 109.5 percent increase for business type activities). Table:4 City of Spokane Valley's Capital Assets (net of depreciation,in thousands of dollars) Total Governmental Business-type Percentage Activities Activities Total Change 2007 2006 2007 2006 2007 2006 2007-2006 Land $ 3,737 $ 2,979 $ - $ - $ 3,737 $ 2,979 25.4% Buildings 10,989 11,643 - - 10,989 11,643 -5.6% Improvements other than Buildings 869 836 - - 869 836 3.9% Infrastructure 32,558 36,782 298 314 32,856 37,096 -11.4% Machinery and Equipment 400 466 11 13 411 479 -14.2% Construction in Progress 5,123 11,494 376 - 5,499 11,494 -522% Total $ 53,676 $ 64,200 $ 685 $ 327 $ 21,505 $ 27,431 -21.6% Major capital asset events during the current fiscal year included the following: • Construction in Progress decreased 52.2% overall due to several major street and infrastructure projects completing and transferred to infrastructure. Y Current fiscal year expenditures for on going improvements to the Street Capital Project infrastructure were$1,030 thousand and Capital Grants Fund construction in progress of$451 thousand for various street projects. • The current year expenditures for civic buildings capital projects included $873 thousand for the balance of the purchase of the Police Precinct Building. Y Costs incurred by the Parks Capital Project Fund for ongoing improvement projects including decks, land acquisitions,and park shelters for general public use totaled$861 thousand. o The Enterprise Fund Stormwater Managements most significant item expensed was$376 thousand for improvements of stormwater drainage for the Beverly Hills and Myers Sewer projects. Additional information on the City's capital assets can be found in Note 6 (Capital Assets)to the financial statements. 11 Long-Term Obligations — At December 31, 2007, the City had total general obligation debt outstanding of$8,760 thousand. This amount is backed by the full faith and credit of the City of Spokane Valley (general obligation bonds) with debt service funded by general government revenues and contributions from the Public Facilities District. The City's long-term debt decreased by$1,408 thousand or 13.8 percent during fiscal year 2007,explained in a large part by the retirement of the note payable in 2007 (see table 5). Table: 5 City of Spokane Valley's Outstanding Obligations (amounts in 000) Governmental Total Percentage Activities Change 2007 2006 2007-2006 General obligation bonds $ 8,760 $ 8,945 -2.1% Note payable - 1,223 -100.0% Total $ 8,760 $ 10,168 -13.8% In addition to the bonded debt, the City's long-term obligations include compensated absences (vacation accruals) and the premium on General obligation bonds. Additional information on the City's long-term debt can be found on Note 11 (General Long-Term Obligations) in the notes to the financial statements. Under Washington State statutes, general obligation indebtedness for general purposes is pursuant to a vote of the electorate and is limited to 2.5% of actual value of taxable property located within the City of Spokane Valley. Non-voted general purpose indebtedness is limited to 1.5% of assessed valuation and the combination of voted and non-voted general purpose indebtedness, which cannot exceed 2.5%of assessed valuation. The assessed valuation of the City of Spokane Valley for the year 2007, for purposes of determining the legal debt margin is; $5,882,946,173. Remaining debt capacities for the City under general voted and non-voted purposes(2.5%) is limited to: $138,143,416. The City of Spokane Valley maintains an A3 rating from Mood's for its non-voted general obligation debt. Additional information regarding debt limitations and capacities can be found in note 11 in the notes to the financial statements. ECONOMIC FACTORS The City of Spokane Valley is continuing along the substantial growth path that has been in place over the last couple of years and since the City incorporated in March 31, 2003. The outlook for the regional economy was weighed in relation to its expected impact on the City of Spokane Valley was considered. The character of the City, including the current and future business activity were reviewed; and based on current projections and trends economic activity will likely slow over the coming year, but will still continue to expand, especially in the commercial/retail sector. There is an estimated 4,000 businesses in Spokane Valley with estimated retail sales of $1.66 billion and the City of Spokane Valley received $19,638 thousand, an increase of 4.2% from the prior year, in sales tax dollars for 2007. Population growth has been significant;the city has increased to over 87,000,an increase of 2.3% over the prior year. Also, in this fiscal'year the employment market has taken advantage of the skilled labor force, as several new businesses have moved into the area. The unemployment rate 12 has reached almost full-employment level with the unemployment rate at a low rate of 4.8% compared to the 5.0% rate at the same time last year. This increased the Labor work force to 9,280 in new jobs compared to 7,100 just a year ago. Housing starts have returned to a more normal pace and the average sales price for residential property is now, $197,384 (2006 Spokane area data) which is 14.3% higher than this point the prior year. Single family dwelling permits in the Spokane area declined to 1,760 and the number of single family dwelling sales dropped to 6,935. The slowing of the real estate market will hold assessed values down which in turn will make significant increases in property tax unlikely. A cooling of the economy will curtail retail sales and the associated sales tax revenue. The real estate excise tax is expected to moderate as the number of real estate sales declines and some slowing of new construction is expected for 2008 which will keep revenues from increasing in new building permits. City wide real estate excise tax generated $2,537 thousand in receipts for city capital projects during 2007. Also, investment earnings improved dramatically over the last year as the federal rates continued to improve,which increased the city's investment earnings by 76.9% compared to the prior year. The City of Spokane Valley has ample reserves and funds to handle an economic slowdown without significantly impacting or reducing services. The Pacific Northwest is unlikely to experience as deep an economic freeze as the rest of the country. The City of Spokane Valley's assessed value climbed 14.6% to 5.80 billion in 2007. An increase of 13% is expected during 2008. The property tax rate for 2008 is expected to be near $1.50 per thousand of assessed value. The City of Spokane Valley contracts with Spokane County and several public service districts for many city services including street maintenance, public safety, library, and fire protection. This allows the City to keep the number of full-time employees to 72. Employee salaries and related benefits are the leading cost for city operations. In 2007, a comparison of the 32 largest cities was conducted within the State of Washington, and the City of Spokane Valley had the fewest number of employees based on those 32 Washington cities with a population of 50,000 and over. These factors have been considered in preparation of the City of Spokane Valley's 2008 budget. No significant general fund tax increases were made in 2007,nor are any anticipated for the 2008 budget. Expenditures for 2008 were budgeted at levels to maintain and provide services at the 2007 level. REQUEST FOR INFORMATION This financial report is designed to provide a general overview of the City of Spokane Valley's finances for those with an interest in the government's finances. Questions concerning any of the information provided in this report or requests for additional information should be addressed to: City of Spokane Valley Finance Department 11707 E. Sprague Ave. Suite 106 Spokane Valley, Washington 99206. 13 City of Spokane Valley, Washington Comprehensive Annual Financial Report e Fiscal Year 2007 This page is intentionally blank. City of Spokane Valley, Washington Comprehensive Annual financial Report Fiscal Year 2007 BSc Financlall Statements Gutty of Spokane Wiley, Washington I Statement of Jett assets December 31, 2007 Primary Government Governmental Business-type Activities Activities Total ASSETS Cash and cash equivalents $ 42,737,425 $ 2,097,847 $ 44,835,272 Taxes receivable 2,093,507 - 2,093,507 Taxes delinquent-receivable 274,144 54,781 328,925 Accounts receivable, (net) 715,925 4,071 719,996 Interest receivable 160,360 6,972 167,332 Grants receivable 1,086,970 - 1,086,970 Internal balances 942,159 25,000 967,159 Capital Assets: Land 3,737,387 - 3,737,387 Depreciable assets,(net) 44,816,022 309,015 45,125,037 Construction in progress 5,123,066 376,119 5,499,185 Total Assets $ 101,686,965 $ 2,353,805 $ 104,560,770 LIABILITIES Accounts payable $ 2,879,875 $ 55,830 $ 2,935,705 Interest payable 33,906 - 33,906 I Internal balances 967,159 - 967,159 i Deposits and other payables 87,676 32,100 119,776 Other accrued liabilities 295,818 9,662 305,480 Deferred revenue - 54,781 54,781 Long-term liabilities: Due within one year 205,716 - 205,716 Due in more than one year 8,885,233 - 8,885,233 Landfill closure liability - - - Total Liabilities 13,355,383 152,373 13,507,756 NET ASSETS Invested in capital assets,net of related debt 46,314,087 685,134 46,999,221 Restricted for: Center Place operating 338,566 - 338,566 Capital projects 15,891,114 - 15,891,114 Unrestricted : Governmental type activities 25,787,815 25,787,815 Business type activities - 2,036,298 2,036,298 Total Net Assets, as restated: 83,331,582 2,921,432 91,053,014 1 Total Liabilities and Net Assets, $ 101,686,965 $ 2,873,805 $ 104,560,770 as restated: I. The notes to the financial statements are an integral part of this statement City of Spokane Valley, WA Comprehensive Annual Financial Report City/of Spokane Valley,lftfashington Statement of Activities For the Year Ended December 31,2©07 Net(Expense)Revenue and . • Program Cevennes Changes in Net Assets Operating Charges for Grants and Capital Grants Governmental Business-Type ties-Type Total EnnctionsfPrograms Expenses Services Contributions o°t Contributions Activities Primary government: • 3 586,524 $ - $ (3,586,524) Governmental General activities: - $ 349,063 $ ( � ) (15,652,667) Pulic safety $ 4,892,954 $ 957,367 $ - . (15,652,667) Public calenv 16,573,317 636,731 _ (1,573,317) . (1,573,317) 1,573,317 14,060,404) - (14,060,404) Physical environment 16,788,167 - 2,727,763 ( _ 262,124 Transportation - 262,124 (920,276) Economic environment 2,258,789 2,520,913 - (920,276) - 2,415,499 1,495,223 (410,688) Culture and recreation _ - (410,688) 410,688 - (35,941,752) Interest on long-term debt 628 812 5,610,234 - 3,076,826 (35 941,752)Total governmental activities 44, . 714,556 714,556 Business-type activities: 970,483 1,658,059 - 26,980 _ —� �lq gg6 Stonnwater management 26,980 714,556 Total business-type activities - 970,483 1,658,059 Total primary government $45,599,295 $ 7, 35,941,752) 7%4,556 (35,227,196) 268,293 $ - $ 3,103,806 ( . General revenues: Taxes: 7,186,056 - 7,186,056 • Sales and use 19,637,830 - 19,637,830 Excseta ese taxes 2,950,477 - 2,950,477 Excise taxes 3,395,422 - 3,395,422 Other taxes 1,895,620 80,568 1,976,188 Interest and investment earnings 15,000 15,000 ( 0�- TransFers 65,568 35,145,973 Total general revenues and transfers 35,080,405 (861,347) 780,124 (81,223) Change in net assets 08 91,134,237 Net assets—beginning of year,as restated 89,192,929 1,941,3 $ 88,331,582 $ 2,721,432 $ 91,053,014 _053,014 Net assets--ending • • • Thenofas to the financial statements are an integral part of this financial statement City of Spokane Valley, WA City of Spokasde Valley, Washivelgon Reconciliation of Total Governmental Fund Balances to Net Assets of Governmental Activities December 31, 2007 Total governrroental Tund balances, as restated: $42,022,338 Amounts reported for governmental activities in the statement of net assets are different because: Capital assets used in governmental activities are not financial resources and this amount reflects the initial investment in capital assets therefore, are not reported in the funds: 53,676,475 Other long-term assets are not available to pay for current- period expenditures and therefore are deferred in the funds: Property Taxes 274,145 Intergovernmental 494,309 Charges for services 95,891 Miscellaneous 10,000 Total 874,345 Interest on long-term debt is not accrued in governmental funds, but rather is recognized as an expenditure when due. (33,906) Internal service funds are used by management to charge the cost of certain activities, such as equipment rental and self insurance, to the individual funds. The assets and liabilities of the internal service fund are included in governmental activities in the statement of net assets. 883,279 Long-term liabilities, including capital leases payable and accrued interest payable, are not due and payable in the current period and therefore are not reported in the funds: Bonds payable (8,760,000) Premium on bond issuance (160,711) Compensated Absences (170,238) Total (9,090,949) Total Net Assets of Governmental Activities as shown on the Statement of Net Assets, as restated: $88,331,882 The notes to the financial statements are an integral part of this financial statement. City of Spokane Valley, Washington Comprehensive Annual Financial Report i Covernmentsl Bel Sheet FY07 113i200910:09 AOl Cigy of Spokape Valley, Washing-Ogg Balance Sheet '-, Governmental Funds December 31, 2007 Service Level General Street Stablization Capital Projects Fund Fund Reserve Fund and Assets $ 13,122,976 $ 4,162,237 $ 5,225,088 $ 4,516,029 Cash and cash equivalents 167,898 - 89,784 1,988,808 - Taxes receivable 479,430 41 - Accounts receivable,(net) 13,449 11,812 14,784 61,625 - Interest receivable 607,959 4,800 - Due from other finds - - - Grants receivable - - 4 620,599 Internal balances 4,348 435 $ 5,242,900 $_�_ $ 16,26,®,798 �5 Total Assets s—== �— Liabilities and Fund Balances Liabilities: 427137 $ - $ - $ 1,802,344 $ 427,137 - Accounts payable 277,015 12,539 4,800 - Accrued wages and benefits payable 112,539 - 173,000 - Due to other funds (33,111) - _ - Other accrued liabilities 33,111 - - Deposits payable - - - - Retainage payable 370,036 _ �- Deferred revenues 629,676 - 173,000 2,508,760 �— —� Total Liabilities --- Fund Balances: Reserved for: - - - Center Place operating - - - 4,447,597 Capital projects - Unreserved: . 13,752,038 - _ General Fund - 5,242,900 Special Revenue Funds 3,718,759 �— �---� Capital Projects Funds 5,242,900 4>4�4T�97 Total Fund Balances,as restated 13,752,038 3,718,759 Total Liabilities and Fund Balances $ 16,260,798 $ 4,348,435 $ 5,242,900 $ continued The notes to the financial statements are an integral part of this statement City of Spokane Valley, WA Covamnental Sal Sheet FY071/9/200910:21 Aft] (Carly of Spokane Valley, Washfrr?gt®P Balance Sheet Governmental Funds December 31, 2007 Special Street Civic Buildings Other Total Capital Projects Capital Projects Capital Projects Governmental Governmental Fund Fund Fund Funds Funds Assets Cash and cash equivalents $ 4,929,891 $ 16,056 $ 5,762,895 $ 4,107,146 $ 41,842,318 Taxes receivable 89,784 - - 31,377 2,367,651 Accounts receivable,(net) - 175,952 - 60,502 715,925 Interest receivable 16,785 - 19,583 13,650 157,698 Due from other funds 100,000 54,000 - 175,400 942,159 Grants receivable - 397,748 - 689,222 1,086,970 - Internal balances - - - Total Assets $ 5,136,460 $ 643,756 $ 5,782,478 $ 5,077,297 $ 47,112,721 Liabilities and Fund balances Liabilities: Accounts payable $ - $ 263,370 $ - $ 367,534 $ 2,865,385 Accrued wages and benefits payable - 1,337 - - 290,891 Due to other funds - - - 599,359 967,159 Other accrued liabilities - - 20,673 (12,438) Deposits payable - _ - _ 87,676 Retainage payable - - 17,365 17,365 Deferred revenues 494,309 - 10,000 874,345 Total Liabilities - 764,016 - 1,014,931 5,090,383 Fund Balances: Reserved for: Center Place operating - - - 338,566 338,566 i Capital projects(deficit) 5,136,460 (120,260) 5,782,478 644,839 15,891,114 Unreserved: General Fund - - - - 13,752,038 Special Revenue Funds - - 1,353,779 6,596,679 Capital Projects Funds - - - 1,725,182 5,443,941 Total Fund Balances(deficit), 5,136,460 (120,260) 5,782,478 4,062,366 42,022,338 as restated Total Liabilities and Fund Balances $ 5,136,460 $ 643,756 $ 5,782,478 $ 5,077,297 $ 47,112,721 The notes to the financial statements are an integral part of this statement. City of Spokane Valley, WA Comprehensive Annual Financial Report City of Spokane Valley, Washington Reconciliation of the Statement of Revenues, Expenditures and.Changes in Fund Balances of Governmental Funds to the Statement of Activities For the Year Ended December 31, 2007 Met change an fund balances -total governmental funds, as restated: $10,517,341 Amounts reported for governmental activities in the statement of activities are different because: Governmental funds report capital outlays as expenditures. However,in the statement of activities,the cost of those assets is allocated over their estimated useful lives as depreciation expense. This is the amount by which depreciation (10,294,154) exceeded capital outlays in the current period. Depreciation (13,387,820) Capital outlay 2,836,102 Transfer of Internal Service capital assets to governmental funds 257,564 Revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the governmental funds: (1,863,460) Property taxes (2,338,582) Sales and use taxes (34,810) Excise taxes (52,048) Other taxes (10,226) Charges for services 222,660 Capital contributions 349,546 Bond proceeds provide current financial resources to governmental funds, but issuing debt increases long-term liabilities in the statement of net assets. Repayment of non-current debt is an expenditure in the governmental funds, but the repayment reduces long-term liabilities in the statement of net assets.This is the 1,058,477 amount by which repayments exceeded proceeds. Some expenses reported in the statement of activities do not require the use of current financial resources and therefore are not reported as expenditures in governmental funds: Compensated absences (8,400) Bond premimum expense 7,316 Bond principle payment accrual (15,833) Interest expense 347 (16,570) Internal service funds are used by management to charge the costs of certain activities, such as equipment rental and self insurance to the individual funds.The net revenue(expense) of the internal service funds (263,581) is reported with governmental activities. Total Change in Net Assets of Governmental Activities ($861,387) as shown on the Statement of Activities, as restated: City of Sport-,t the Valley, Washiagtopg Statement of Revenues, Expenditures and Changes in Fund Balances i Governmental Funds 1 For the Year Ended December 31, 2007 . Service Level General Street Stablization Capital Projects Fund Fund Reserve Fund Fund Revenues Taxes $ 30,444,247 $ 2,280 $ - $ 1,300,965 Licenses and permits 2,515,588 - - - Intergovernmental 906,126 2,125,779 - - Charges for services 786,731 8,332 - - Fines and forfeitures 580,871 - - Investment interest 525,182 236,643 261,878 213,937 Miscellaneous 1,279,304 6,352 - Total Revenues 37,038,049 2,379,386 261,878 1,514,902 Expenditures Current: General government 4,409,039 - - - Public safety 16,272,590 - - - Physical environment 1,528,125 - - - Transportation 38,953 4,169,946 - - Economic environment 1,757,693 - - - Culture and recreation 1,966,247 - - - Debt Service: Principal retirement - - - - Interest expense - - - - I Capital Outlay: Capital expenditures 75,217 25,649 - - Construction in progress - - - - Total Expenditures 26,047,864 4,195,595 - - 1 Excess of Revenues Over(Under) 10,990,185 (1,816,209) 261,878 1,514,902 Expenditures Other Financing Sources(Uses) Transfers In 74,300 900,000 361,000 - I Transfers(out) (6,023,903) (59,300) - (555,756) Total Other Financing Sources(Uses) (5,949,603) 840,700 361,000 (555,756) Net Change in Fund Balances 5,040,582 (975,509) 622,878 959,146 Fund Balances Beginning of Year,restated 8,711,456 4,694,268 4,620,022 3,488,451 Fund Balances End of Year $ 13,952,038 $ 3,718,759 $ 5,242,900 $ 4,449,597 I • I 1 The notes to the financial statements are an integral part of this statement continued Cary of Spokain,a Valley, Washington Statement of Revenues, Expenditures and Changes in Fund.Balances Governmental Funds For the Year Ended December 31, 2007 Special Street Civic Buildings Other Total Capital Projects Capital Projects Capital Projects Governmental Governmental Fund Fund Fund Funds Funds Revenues Taxes $ 1,288,715 $ - $ - 5 461,578 $ 33,497,785 Licenses and permits - - - - 2,515,588 Intergovernmental - 578,483 - 1,224,558 4,834,946 Charges for services - - - - 795,063 Fines and forfeitures - - - - 580,871 Investment interest 226,705 - 234,106 193,747 1,892,198 Miscellaneous - 40,459 - 168,991 1,495,106 Total Revenues 1,515,420 618,942 234,106 2,048,874 45,611,557 lEripeuditures Current: General government - - - - 4,409,039 Public safety - - - - 16,272,590 Physical environment - - - - 1,528,125 Transportation - - - 4,208,899 Economic environment - - - 483,506 2,241,199 Culture and recreation - - - - 1,966,247 Debt Service: Principal retirement - - 873,477 185,000 1,058,477 Interest expense - - - 411,035 411,035 Capital Outlay: Capital expenditures - 561,888 679,263 1,342,017 Construction in progress - 468,188 - 1,025,897 1,494,085 Total Expenditures - 1,030,076 873,477 2,784,701 34,931,713 Excess of Revenues Over(Under) 1,515,420 (411,134) (639,371) (735,827) 10,679,844 Expenditures Other Financing Sources(Uses) Transfers In - 462,511 3,779,000 1,223,509 6,800,320 Transfers(out) (93,245) - - (230,019) (6,962,223) Total Other Financing Sources(Uses) (93,245) 462,511 3,779,000 993,490 (161,903) Net Change in Fund Balances 1,422,175 51,377 3,139,629 257,663 10,517,941 Fund Balances Beginning of Year(deficit) 3,714,285 (171,637) 2,642,849 3,804,703 31,504,397 and as restated Fund Balances End of Year(deficit) $ 5,136,460 $ (120,260) $ 5,782,478 $ 4,062,366 $ 42,022,338 The notes to the financial statements are an integral part of this statement. UV of Spokane Valley, Washington Statement of Revenues, Expenses, and Changes in Fund Net Assets Proprietary Funds For the Year Ended December 31, 2007 • Business-activity Governmental Enterprise Fund Type activities Stormvvater Management Internal Service]Funds Operating Revenues 2007 2006 2009 2006 Charges for services $ 1,657,924 $ 1,557,916 $ - $ 161,522 Miscellaneous revenues 135 561 - - Total Operating Revenues 1,658,059 1,558,477 - 161,522 Operating Expenses Personal services 204,193 184,716 - - Professional services 32,939 750,980 - - Materials and supplies 11,950 12,878 - Other services and expenses 702,880 144,597 186,342 169,033 Depreciation and amortization 18,521 9,175 - 174,384 Total Operating Expenses 970,483 1,102,346 186,342 343,417 Operating IIncomme 687,576 456,131 (186,342) (181,895) Non-Operating Revenues (Expenses) Intergovernmental revenues 26,980 - - - Interest and investment income 80,5.68 57,460 3,422 37,069 I Total Non-Operating Revenues(Expenses) 107,548 57,460 3,422 37;069 Income(loss) before Contributions and Transfers 795,124 513,591 (182,920) (144,826) Contributions and Transfers Transfers In - 123,045 176,903 133,132 Transfers(out) (15,000) (152,438) (257,564) - Change in Net Assets 780,124 484,198 (263,581) (11,694) Net Assets Beginning of Year 1,941,308 1,457,110 1,146,860 1,158,554 Net Assets End of Year $ 2,721,432 $ 1,941,308 $ 883,279 $ 1,146,860 i i The notes to the financial statements are an Integral pad of this statement 1 StmtNAsset FD402 FD501€502 FY07 1/912009 12:44 PM City of Spokane Valley, Washington Statement of Net Assets -Proprietary Funds December 31, 2007 Governmental Business-activity Enterprise Fund Type activities Stormwater Management Internal Service Funds 2006 2- 007 2006 �- Assets 2 Current Assets: $ 2,097,847 $ 1,590,886 $ 895,107 $ 848,298 Cash and cash equivalents 54,781 44,825 • Taxes delinquent-receivable 4,6,972 _ 25,000 - - Accounts receivable, (net) 072 _ 2,662 Interest receivable 113,816 45,42- Due from other funds 7,049 -79-37731-5 Due from other governments - � 897,769 -2,188,671 Total Current Assets Capital Assets: 13,511 13,511 786,004 Machinery and equipment 323,199 323,199 - Construcion 376,119 - (528,441) Construction in progress 9,175 Less accumulated depreciation (27,695) �� Total capital assets(net of accumulated depreciation) 685,134 327,535 - 257,a63 Total Assets $ 2,873,805 2,084,111 $ 897,769 $ 1,151,288 $---- Liabilities 1,068 Current Liabilities: $ 55,830 $ 31,995 $ 14,490 $ Accounts payable 9,662 10,861 Accrued payroll and benefits payable 22,328 3,153 Due to other funds - - 20- Due to other governments 32,100 32,100 Deposits and other payables 54,100 9 Deferred revenue 14,490 4,428 152,373 142,803 Total Current Liabilities 4,428 152,373 142,803 14,490 Total Liabilities Net Assets 327,535 257,563 685,134 883,279 889,297 Invested n capital assets,net of related debt 2,036,298 1,613,773 Unrestricted 1,146,860 2,721,432 1,941,308 883,279 Total Net Assets Total Liabilities and Net Assets $ 2- ,873,805 $ 2,084,111 $ 897,769 $ 1,151,288 erne City of Spokane Valley, Washington Statement of Cash Flows -Proprietary Funds For the Year Ended December 31, 2007(with comparative totals for 2006) Business Activity Governmental Type Activities Stormwater Management Enterprise Fund Internal Service Funds Cash Flows from Operating Activities 2007 2006 2007 2006 Cash received from customers $ 1,643,897 $ 1,576,522 $ - $ 22,442 Cash paid to employees (205,392) - - Other cash receipts 9,397 Receipts from internal activity-interfund services provided 66,565 - 39,612 161,523 Cash payments to suppliers for goods and services (723,934) (1,069,555) (173,127) (169,898) Net cash(used)provided by operating activities 790,533 506,967 (133,515) 14,067 Cash Flows from Noncapital Financing Activities Operating subsidies&transfers in(out) other funds (15,000) - (80,661) - Net cash(used)by noncapital financing activities (15,000) - (80,661) - Cash Flows from Capital and Related Financing Activities Proceeds from sale of capital assets - - - 45,428 Acquistion, construction and(transfers)of capital assets (376,119) - 257,563 Intergovernmental revenues 26,980 - - - Operating transfers net - (29,393) - - Purchases of capital assets - (156,997) - - Net cash provided(used)by capital and related financing activities (349,139) (186,390) 257,563 45,428 1 Cash Flows from Investing Activities Interest received 80,568 58,021 3,422 37,069 Net cash provided by investing activities 80,568 58,021 3,422 37,069 Net increase in Cash and Cash Equivalents 506,962 378,598 46,809 96,564 Cash and Cash Equivalents-January 1 1,590,885 1,212,287 848,298 751,734 Cash and Cash Equivalents-December 31 $ 2,097,847 $ 1,590,885 $ 895,107 $ 848,298 I Reconciliation of Operating Income (Loss)to Net Cash Provided (Used) by Operating Activities Operating Income (loss) $ 687,576 $ 455,570 $ (186,342) $ (181,895) Adjustments to reconcile operating income to net cash provided by operating activities: Depreciation 18,521 9,175 - 174,384 I j Loss on disposal of asset - - - 'Increase)Decrease in Assets: Receivables(net) (14,027) 25,655 - - Due from other funds 88,816 - 45,427 22,442 Due from other governments 7,049 (7,049) - - Interest receivable (6,972) - (2,662) - 'ncrease(Decrease)in Liabilities: Accounts payable 23,835 31,995 13,422 1,068 Accrued payroll and benefits payable (1,199) 2,956 - - Due to other funds (22,328) 22,328 - - Due to other governments - (15,668) (3,153) (2,139) Deposits and other payables - - (207) 207 Deferred revenues 9,262 (17,995) - - Total adjustments 102,957 51,397 52,827 195,962 det Cash Provided (used)by Operating Activities $ 790,533 $ 506,967 $ (133,515) $ 14,067 he notes to the financial statements are an integral part of this statement. City of Spokane Valley, Washington Comprehensive Annual Financial Report - Fiscal Year 2007 Notes to the FOnancL 8 Statements City of Spokane Valley Notes to Financial Statements • NOTE 1—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: The City –Manager Form of overrnment City)was incorporated on City's major operations,asaauthorized under r the laws of the Stater a Council zoning,public safety,public works,and of Washington applicable to a non-charter city code, include planning and zoning,p �,P recreation and culture. On May 10,2005 an election was held that annexed library services to the Spokane County Library District. The district assumed responsibility for all city library services on January 1,2006. The accounting and reporting policies of the City relate to the accompanying financial statements of the City of Spokane Valley,Washington as applied o state and been governmental ntal entities. GAAP for for local governments include those principles(GAAP) g principles prescribed by the Governmental Accounting Standards Board(GASB)which is the accepted standard- setting body for establishing governmental accounting and financial reporting principles,the Financial Accounting Standards Board(FASB),when applicable, and the American Institute of Certified Public Accountants(AICPA) pronouncements that have been made applicable by GASB Statements or Interpretations. A. Reporting entity As required by GAAP the City's financial statements present the City of Spokane Valley–the primary government. There are no component units(either blended or discretely presented) included in these statements. B. Government-wide and fund financial statements The City's basic financial statements include both government-wide(reporting the City as a whole)and fund financial statements(reporting the City's major funds)to report its financial position and the results of operations. Both the govermnent-wide and fund financial statements categorize primary activities as either government or business-type. The government-wide financial statements (i.e.,the statement of net assets and the statement of activities)report information on all of the non-fiduciary activities of the primary government. For the most part,the effect of interfund activity has been removed from these statements. Governmental activities, tichino,wally rely to supported d by taxes and intergovernmental revenues, are reported separately from business-type a significant extent on fees and charges for support. The statement of activities demonstrates the degree to which the direct expenses of a given function or segments are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or ly segment. Program revenues include 1)charges to customers or applicants who purchase, and or d r ectl ions that are from goods, services,or privileges provided by a given function or segment and 2)grants restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported as general revenues. Separate financial statements are provided for governmental funds,proprietary funds,and fiduciary funds. The City has no fiduciary funds. Major combined for presentation purposes lin the governmental funds statements aand the proprietary funds statements. are 1 City of Spokane Valley Notes to Financial Statements NOTE 1—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(continued): C. Measurement focus, basis of accounting,and financial statement presentation The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are proprietary funds. Under this approach,revenues are recorded when earned and expenses are recorded when a liability is incurred,regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all the eligibility requirements imposed by the provider have been met. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectable within the current period or soon thereafter to pay liabilities of the current period. For this purpose,the government considers revenues to be available if they are collected within 30 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures,as well as expenditures related to compensated absences,claims,and judgments are recorded only when the payment is due. Property taxes, franchise fees,licenses, and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. Only the portion of special assessments receivable due within the current fiscal period is considered to be susceptible to accrual as revenue of the current period. All other revenue items are considered to be measurable and available only when cash is received by the government. The city reports the following major governmental funds: The General Fund is the City's primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund. The Street Fund is responsible for the maintenance of all city streets and bridges. The Service Level Stabilization Reserve Fund provides emergency revenue source to maintain service levels in the event of a downturn in the local economy. The Capital Projects Fund and the Special Capital Projects Fund are used as matching funds for construction projects. These funds account for the collection and expenditure of the real estate excise tax levied on all sales of real estate. Real estate excise tax must be spent on capital improvements identified in a capital improvements plan. The Street Capital Projects Fund accounts for monies used to finance the six year transportation improvement plan. Revenues are transfers from the Arterial Street Fund, Capital Projects Fund, Special Capital Projects Fund and Street Bond Fund. ' i City of Spokane Valley Notes to Financial Statements NOTE 1—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(continued): The city reports the following major governmental funds(continued): The Civic Buildings Capital Projects Fund accounts for capital improvement projects funded by revenues that are allocated as reserve or specifically designated for the future expansion and construction of Civic Buildings for the City of Spokane Valley.Revenues are in the form of transfers from the General Fund. The city reports the following major proprietary fund: The Stormwater Management Fund accounts for the receipt and expenditure of the stormwater management fee. The expenditures are used for stormwater control construction and management. Additionally,the government reports the following fund types: Special revenue funds account for arterial street construction and maintenance,hotel/motel tax revenues and expenditures, CenterPlace operating reserve,Winter Weather Reserve, and revenues and expenditures for the Paths and Trails Fund. Debt service funds account for the resources accumulated and payments made for principal and interest on general government debt except those to be accounted for in another fund. Capital project funds account for the acquisition or development of capital facilities for governmental activities. Their major sources of revenues are from proceeds of general obligation bonds,grants from other agencies,and contributions from other fiurds. Internal service funds account for computer hardware/software, equipment,vehicle replacement, and risk management services provided to other departments on a cost reimbursement basis. Private sector standards of accounting and financial reporting issued prior to December 1, 1989, generally are followed in both the government-wide and proprietary fund financial statements to the extent that those standards do not conflict with or contradict guidance of the Governmental Accounting Standards Board. Governments also have the option of following subsequent private-sector guidance for their business-type activities and enterprise funds, subject to this same limitation. The City has elected not to follow subsequent private-sector guidance. As a general rule interfund activity has been eliminated from the government-wide financial statements. Exceptions are payments in lieu of taxes, external type transactions within internal service funds(revenues and expenses for interest or services to other governmental organizations), and other charges for stormwater services. Elimination of these charges would distort the direct cost and program revenues reported for these functions. Amounts reported as program revenues include 1)charges to customers or applicants for goods, services,or privileges provided,2)operating grants and contributions, and 3)capital grants and contributions, including special assessments.Internally dedicated resources are reported as general revenues rather than program revenues. Likewise, general revenues include all taxes. City of Spokane Valley Notes to Financial Statements NOTE 1—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(continued): Proprietary funds distinguish operating revenues and expenses from non-operating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations. The principle operating revenues of the stormwater enterprise fund is a stormwater assessment fee. Operating expenses of enterprise funds and internal service funds include the cost of sales and services, administrative expenses,and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as non-operating revenues and expenses. When both restricted and unrestricted resources are available for use, it is the City's policy to use restricted resources first, and then unrestricted resources as they are needed. D. Assets,liabilities,and fund equity 1.Deposits and investments The City considers all highly liquid assets including demand deposits, petty cash,money market accounts,CD's, investments in the State Treasurer's Local Government Investment Pool(LOW), and short-term investments with a maturity of three months or less from the date of acquisition as cash and cash equivalents. These amounts are classified on the balance sheet or in the statement of net assets within cash and cash equivalents in the various funds. The interest on these investments is prorated to the applicable funds and the City's policy has been to hold its investments until maturity in an attempt to reduce market fluctuation risk. Investments of the City can be drawn down on demand. As authorized by state law,the City is allowed to invest in obligations of the U.S.Treasury, commercial paper, certificates of deposits, money market funds,mutual funds, and the State Treasurer's Local Government Investment Pool (LOW). Investments for the City of Spokane Valley are reported at fair value at December 31,2007. The Washington State Local Government Investment Pool(LGIP)operates in accordance with the Security Exchange Commission's (SEC)Rule 2a-7 of the Investment Company Act of 1940 and other appropriate state laws and regulations.The fair value of the LOW portfolio is calculated by a master custodian or by an independent pricing service under contract with the State Treasurer's Office. The reported fair value of the City's pool position in the State of Washington's LON is the same as the fair value of the pool shares(refer to note 4). 2.Receivables and payables Taxes receivable consists of property taxes and related interest and penalties. Accrued interest receivable consists of amounts earned on investments,notes,and contracts. Accrued interest payable consists of amounts owed on notes, loans,and contracts. Customer accounts receivable/payable consist of amounts owed from/to private individuals or organizations for goods and services including amounts owed. If the transactions are with another governmental unit, it is accounted for within"due from/to other governments." Receivables have been reported net of estimated uncollectible accounts. Because property taxes and special assessments are considered liens on property,no estimated uncollectible amounts are established. City of Spokane Valley Notes to Financial Statements NOTE 1—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(continued): Activity between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to either"due to/from other funds"(i.e.,the current portion of interfund loans)or"interfund loans receivable/payable"(i.e.,the non-current portion of interfund loans). All other outstanding balances between the governmental activities and business-type activities are reported in the government-wide financial statements as "internal balances(refer to note 9)." Advances,between funds,as reported in the fund financial statements, are offset by a fund balance reserve account in applicable governmental funds to indicate that they are not available for appropriation and are not expendable available financial resources. In the government-wide financial statements, and proprietary fund types in the fund financial statements, long-term liabilities are reported in applicable governmental activities,business-type activities, or proprietary fund type statement of net assets. Wages and benefits payable represent wages earned at the end of the current fiscal year but not paid until the next fiscal year. 3.Inventories and prepaid items Reported inventories in the governmental and proprietary funds consist of expendable supplies held for consumption. The cost of inventories has been recorded as expenditure at the time individual inventory items were purchased(purchase method). Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both the government-wide and fund statements. 4. Capital assets and deprecation Capital assets include: property, plant, equipment,and infrastructure assets(e.g.roads,bridges, sidewalks, and similar items), are reported in the applicable governmental or business-type columns in the government-wide financial statements. The City defines capital assets as assets with an initial, individual cost of more than$5,000 and an estimated useful life in excess of one year. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Other donated assets are recorded at estimated fair market value at the date of donation. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized. Major outlays for capital assets and improvements are capitalized as projects are constructed.Interest incurred during the construction phase of capital assets of business-type activities is included as part of the capitalized value of the assets constructed(refer to note 6). Property,plant,and equipment of the primary government are depreciated using the straight line method over the estimated service life as follows: 5 City of Spokane Valley Notes to Financial Statements NOTE 1—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(continued): Buildings and improvements 10-60 years Infrastructure 5-40 years Light/Heavy Transportation Equipment 5-10 years Other Equipment 2-20 years Office&Computer Equipment 3-5 years 5.Long-term debt Liabilities for long-term debt are recorded in the government-wide statement of net assets and in the governmental funds balance sheet. The liabilities include bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds. Bonds payable are reported net of the applicable bond premium or discount. Issuance costs are reported as deferred charges. Long-term debt outstanding at year end is outlined in Note 11. For governmental funds financial statements, bond issuance costs are expended at the time of issuance. Bond premiums and discounts are deferred and amortized over the life of the bonds. Bond proceeds are reported as other financing sources net of the applicable premium or discount. Issuance costs,even if withheld from the actual net proceeds received, are reported as debt service expenditures. The nature of debt in the governmental activity is specific to a program and,therefore; debt service costs are not an allocated expense. 6.Deferred revenues The deferred revenues account is used to offset receivables established in the governmental fund financial statements for certain revenues that are measurable but not considered available to finance payment of current obligations, and,therefore,not susceptible to accrual on the modified accrual basis. When the receivable amounts are collected in future periods,this liability account is reduced and corresponding revenue is recorded. Deferred revenues represented in this manner on the accompanying financial statements are uncollected property taxes levied - and uncollected road taxes levied. 7. Compensated absences Compensated absences are absences for which employees will be paid, such as vacation and sick leave. Vacation pay,which may be accumulated up to 360 hours, is payable upon resignation,retirement, or death. All vacation pay is accrued when incurred in the government-wide,proprietary and fund financial statements. An additional amount has been accrued for the city's share of Medicare taxes related to the vacation accrual. A liability for these amounts is reported in the government fund statements only if they have matured,for example, as a result of employee resignations and retirements 8. Fund balance designations and reservations In the fund financial statements,governmental funds report reservations of fund balance for amounts that are not available for appropriation or are legally restricted by outside parties for use for a specific purpose. Designations of fund balance represent tentative management plans that are subject to change. II City of Spokane Valley Notes to Financial Statements NOTE 1—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued : E. Revenues,expenditures,and expenses 1.Program revenues Program revenues nd include charges ges rants services to customers for and contributions withithe dGovernment-widestatemnttof activities. and contributions, and es include business grants for services include business licenses, construction permits, and recreation program fees. 2. General revenues Property taxes,retail taxes,business taxes,excise taxes, and associated penalties and interest,and interest and investment earnings are classified as general revenues within the Government-wide statement of activities. 3.Interfund transfers Permanent reallocations of resources between funds of the reporting entity are classified as interfund transfers.For the purposes of the Government-wide Statement of Activities,all interfund transfers between individual governmental funds have been eliminated. 4.Expenses/expenditures Expenses in the Governnent-wide statement of activities are reported by function as a governmental activity (general government,security of persons and property,physical environment,transportation,economic environment, culture and recreation,or interest on long-term debt),or business-type activity(wastewater,or i b financial expenditures of governmental funds are classified current by function, principle and interest payments, or purchases of capital items. Proprietary expenditures are classified as operating or non-operating. 5.Operating and non-operating revenues and expenses Operating revenues ing goods and/or expenses ervices in proprietary on to the proprietary fund's from providing pal ongoing operationproducing also and delivering goods All revenue and expenses not lmeeog this definition are financing,o -operating revenues and expenses. investing NOTE 2–STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY: A. Scope of budget Annual appropriated budgets are adopted for all funds on a basis consistent with generally accepted accounting principals. Legal budgetary control is established at the fund level. Subsidiary revenue and expenditure ledgers are used to compare the budgeted amounts with actual revenues and expenditures. As a management control device, the subsidiary ledgers are used to monitor expenditures for individual functions and activities by object class. B. Procedures for adopting the original budget The City's budget procedures are mandated by the Revised Code of Washington 35A.33. The following are key procedural steps in the City's budget future et development process. Note that the process and dates are for the 2007 budget process and may be changed for m In April,the official"budget anagers. Budget development linstruct instructions and aother materials are provided o the departments at this time. 7 City of Spokane Valley Notes to Financial Statements NOTE 2—STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY continued: o In June departments submit revenue and expenditure estimates to the Finance department. The City Council and City management staff discusses City goals and priorities and reaffirm overall City priorities, vision, and mission at a mid-year retreat. Additional policy guidance is provided throughout the year. o In July the Finance department submits the preliminary budget to the City Manager. o In August the City Manager submits estimates on the current year's revenue and expenditures for the upcoming year to the council. o During September,preliminary budget documents were prepared,printed and filed with City Clerk. This proposed budget is presented to the City Clerk and copies are made available to the public. The Council set the dates of the preliminary and final budget hearings. 0 Before December 31st the City Council,by a majority vote,will adopt the budget by ordinance, establishing the budget appropriation for the year. a The approved budget is published and distributed during the first quarter of the following year. Copies are made available to the public. o Monthly budget monitoring reports are published by the Finance Department to report on actual performance compared to budget estimates and to identify any remedial actions that may be needed. C. Amending the budget The budget,as adopted, constitutes the legal authority for expenditures. The City's budget is adopted at the fund level, so that expenditures may not legally exceed appropriations at that level of detail. The City Manager is authorized to transfer budgeted amounts within a fund;however, any revisions that alter the total expenditures of a fund,or that effect the number of authorized employee positions, salary ranges, or other conditions of employment must be approved by the City Council. When the City Council determines that it is in the best interest of the City to increase or decrease the appropriation for a particular fund, it may do so by ordinance approved by one more than the majority after holding a public hearing. The City's budget was amended two times during the fiscal year. The financial statements contain the original and final budget information. The original budget is the first complete appropriated budget. The final budget is the original budget adjusted by all reserves,transfers, allocations, supplemental appropriations,and other legally authorized changes. All appropriations lapse at year end. Unexpended resources must be re-appropriated in the subsequent period. D. Compliance There have been no material violations of finance-related legal or contractual provisions,and there have been no expenditures exceeding legal appropriations in any of the funds. E. Deficit fund equity At December 31,2007,the Street Capital Projects Fund had a deficit fund balance of($120,260). Also,the Capital Grants fund had a deficit fund balance of($17,365).These deficits will be eliminated by the appropriation of future revenue from the general fund and other resources. I � o City of Spokane Valley Notes to Financial Statements NOTE 3—RECONCILIATION OF GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS: The governmental fund statements include reconciliations between the fund statements and the government-wide basis statements.ts.Differences accrual d make reconciliations between the include e the two differing measurement focuses and A. Explanation of certain differences between the governmental fund balance sheet and the government- wide statement of net assets The assets—governmental balance ctivities as reported reconciliations n the government-wide statement of total et assets. Oneaelement of that reconciliation explains ' liabilities, s f s e currentper od andth eeforeare of r portedi the including und funds."The details of the($9,090,949)difference are follows Long term liabilities- current balances Bs as of 12/payable/0I $ (8,760,000) )711 Premium on bond issuance (160, $ (8— 92 Total 0,711) (17 ) Compensated absences Net adjustment to reduce fund balance- total governemental funds $ (9 to arrive at net assets-governmental activities Another element of that reconciliation explains the"Internal service funds"are used by management to charge the cost of certain activities, such as health insurance costs to the individual funds.The assets and liabilities of the internal service fund are included in governmental activities in the statement of net assets.The details of the $883,279 difference are as follows. $ 897,769 Net assets of the internal service fund ( 99) Less: Internal payables Net adjustment to increase fund balance - total governmental funds to arrive at net assets - $ 8 governmental activities --__ Also, another element of the reconciliation explains that capital assets used in governmental activities s are not "governmental nmental current fmancial resources and the balance reflects the initial investment in capital assets therefore, o funds do not report capital assets."The details of the$53,676,475 difference are as follows: 9 City of Spokane Valley Notes to Financial Statements NOTE 3:RECONCILIATION OF GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS continued: Beginning balance-Capital Assets, net of accumulated depreciation $ 64,200,656 Additions of Capital Assets, net of accumulated depreciation (4,004,008 Reductions of Capital Assets, net of accumulated depreciation (6,520,173) Net adjustment to increase fund balance - total governmental funds to arrive at net assets - governmental activities $ 53,676,475 B. Explanation of certain differences between the governmental fund statement of revenues,expenditures, and changes in fund balances and the government-wide statement of activities The governmental fund statement of revenues, expenditures, and changes in fund balances includes reconciliation between net changes in fund balances—total governmental funds and changes in net assets of governmental activities as reported in the government-wide statement of activities. Governmental funds report capital outlays as expenditures. However, in the statement of activities,the cost of those assets is allocated over their estimated useful lives as depreciation expense. The details of this ($10,294,154)difference are as follows: Capital outlay $ 2,836,102 Depreciation expense (13,387,820) Internal service fund capital asset transfer to governmental fund 257,564 Net adjustment to decrease net changes in fund balances-total governmental funds to arrive at changes in net assets of governmental activities S (10,294,154) Bonds and notes payable repayments in the amount of$1,058,477 exceeded proceeds. Revenues in the statement of activities that do not provide current financial resources to governmental funds are not reported as revenues in the funds$(1,863,460). Another element of the reconciliation states that "some expenses reported in the statement of activities do not require the use of current financial resources and therefore are not reported as expenditures in governmental funds". The details of this $(16,570)difference are as follows: Compensated absences $ (8,400) Bond premimum expense 7,316 Bond principle payment accrual (15,833) interest expense 347 Net adjustment to decrease net changes in fund balances - total governmental funds to arrive at changes in net assets of govenmental activities $ (16,570) City of Spokane Valley Notes to Financial Statements NOTE 3:RECONCILIATION OF GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS continued: • Another element of the reconciliation states the `internal service funds are used by management to charge the cost of certain activities, such as self insurance and equipment rental and replacement, to individual funds."The details of this($263,581)difference are as follows: Revenues: 3,422 Interest and investment income 3,422 Total Revenues (267,003) Less expenditures: Net adjustment to increase net changes in fund balances - total governmental funds to arrive at changes in net assets $ (263,581) of governmental activities NOTE 4—DEPOSITS AND INVESTMENTS): A.Deposits The City's deposits and certificates of deposit are entirely covered by the federal depository insurance(FDIC)or by collateral held in a multiple financial institution collateral pool administered by the Washington Public Deposit Protection Commission(PDPC). The PDPC is a statutory authority established under Chapter 39.58 of the Revised Code of Washington and provides an additional level of security for The City of Spokane Valley's deposits. The City of Spokane Valley maintains a certificate of deposit, money market account,and various checking accounts with a local bank in Spokane Valley.The total amount on deposit with this bank was$2,822,756 at December 31,2007.These bank deposits were in a State authorized public depository and were within the State limit of the depositaries(bank's)net worth per Revised Code of Washington 39.58.010 and Revised Code of Washington 39.58.135. D. Investments As required by state law,all investments of the City's funds are obligations of the U.S. Government,U.S. agency issues,obligations of the State of Washington, general obligation of Washington State municipalities(the State Treasurer's Local Government Investment Pool(LGIP), or certificate of deposit with Washington State banks and savings and loan institutions. Investments are shown on entity-wide Statement of Net Assets at fair market value or 2a7-like-pools at amortized cost. Investments are reported within cash and investments of governmental activities and within cash and cash equivalents of business-type activities. The City's investments are categorized to give an indication of risk assumed at year-end. The following summary shows the City's investments at year-end categorized by risk. o Category 1 includes investments that are insured,registered,or held by the City or its agent in the City's name. o Category 2 includes uninsured and unregistered investments,which are held by the counterparty's trust department or agent in the City's name. o Category 3 includes uninsured and unregistered investments for which the securities are held by the counterparty's trust department or agent,but not in the City's name. 11 City of Spokane Valley Notes to Financial Statements The City had no Category 1,2, or 3 type investments in their investment portfolio as of December 31,2007. C.Deposit and investment reconciliation Amounts reported in the fund statements are as follows: Fair Value Carrying Cash Amount Investments Equivalents State investment pool $ 42,013,090 $ - $ 42,013,090 Money market account 1,634,660 - 1,634,660 Certificates of deposit 1,026,183 - 1,026,183 Total investments not subject to credit risk $44,693,933 $ - $44,673,933 NOTE 5—PROPERTY TAXES: The County Treasurer acts as an agent to collect property taxes levied in the county for all taxing authorities. The County Assessor is responsible for determining what the individual property taxes are, based upon the monies requested by the taxing districts and the assessed valuation within these districts. Taxes are levied annually on January 1st on property values listed as of the prior May 31'. Assessed values are established by the County Assessor at 100% of fair market value. A revaluation of all property is required every four years. Taxes are due in two equal installments on April 30th and October 3151. Tax liens are automatic at the point the taxes are levied. Property taxes levied for the current year are recorded as a receivable when levied, offset by deferred revenue. During the year,property tax revenues are recognized when cash is collected. At year-end,property tax revenues are recognized for collections to be distributed by the County Treasurer in January. No allowance for uncollectible taxes is established because delinquent taxes are considered fully collectible. For 2007,the City levied$9,577,419 on an assessed valuation of$5,882,946,173. The tax rate for general City operations is limited by State law(RCW 84.52.043)to$3.60 per$1,000 of assessed valuation, deducting from there the levy of$1.50 by the Spokane County Fire Districts#1 and#8, and$.50 for ( i Library Districts which leaves the City with the authority to levy$1.60 for its own purposes. This amount may be reduced for any of the following reasons: (1) The Washington State Constitution limits the total regular property taxes to one percent of assessed valuation or $10 per$1,000 of value. If the taxes of all districts exceed this amount, each is proportionately reduced until the total is at or below the one-percent limit. (2) Initiative 747 passed by the voters in November of 2001 limits the amount by which a taxing jurisdiction can increase the amount of its regular property tax levy to the lesser of the Implicit Price Deflator(IPD)or one percent,plus adjustments for new construction and annexations. Tax increases higher than one percent must be approved by the voters at an election held according to RCW 84.55.050. A simple majority vote is required. (3) The City may voluntarily levy taxes below the legal limit. I i City of Spokane Valley Notes to Financial Statements NOTE 6—CAPITAL ASSETS AND DEPRECIATION: Donated capital assets received from Spokane County at the time of incorporation were recorded at cost and the accumulated depreciation at the time of transfer. These assets are shown as capital contributions on the statement of activities. The following schedule details capital assets donated and transferred during the year ended December 31,2003:- Balance A summary of changes in governmental capital assets follows: after Historical Accumulated Depreciation Cost Depreciation Infrastructure: $ 187,732,531 $ 127,418,027 $ 60,314,504 Roadways 9,056,000 4,528,000 4,528,000 Crosswalks beacons 130,084 13,008 117,076 Brosgwalks 5,633,979 2,808,112 2 825.867 Bridges 202 552,594 134,767,147 67 785.447 Total infrastructure Parks: 1,548,655 1,548,655 B 898,729 609,824 288,905 Buildings 2,123,571 1,059,298 1,064,273 Improvements other buildings 3,337 3.003 334 Machinery and equipment 4,574,292 1,672,125 2.902,167 Total parks Total County assets donated $207,126,886 $ 136,439,272 $ 70,687,614 Capital asset activity for the year ended December 31,2007, is summarized as follows: Ending 1/1/2007 Beginning Balance Governmental activities Balance Additions Reductions Dec.31,2007 Land(non depreciable) $ 2,978,847 $ 758,540 - $ 3,737,387 (6,520,173) 5,123,066 Construction in progress 11,643,239 _ - 12,216,097 Buildings 12,216,097 - 122,906 Leasehold improvements 122,906 109,450 - 2,233,021 Improvements other than buildings 2,123,571 8,413,068 - 217,930,822 Infrastructure 209,517,754 Machinery and equipment 1,158,793 102,755 - 1,261,548 $239,761,207 $9,383,813 $ (6,520,173) $242,624,847 Total capital assets 13 City of Spokane Valley Notes to Financial Statements NOTE 6—CAPITAL ASSETS AND DEPRECIATION(continued): Beginning Ending Balance Balance Less accumulated depreciation for: 1/1/2007 Additions Reductions 12/31/2007 Buildings $ 771,044 $ 477,283 $ - $ 1,248,327 Leasehold improvements 73,553 28,211 101,764 Improvements other than buildings 1,287,275 76,918 1,364,193 Infrastructure 172,736,158 12,636,733 - 185,372,891 Machinery and equipment 692,521 168,676 861,197 Total accumulated depreciation $ 175,560,551 $ 13,387,820 $ - $ 188,948,372 Capital assets, net of accumulated Depreciation $ 64,200,656 $ (4,004,008) $(6,520,173) $ 53,676,475 Beginning Ending Balance Increase Decrease Balance Business-type Activities: Infrastructure $ 323,199 $ - $ - $ 323,199 Machinery and equipment 13,511 - - 13,511 � Construction in progress - 376,119 - 376,119 I Total capital assets 336,710 376,119 - 712,829 Less accumulated depreciation for: Infrastructure 9,048 15,798 - 24,847 Machinery and equipment 126 2,722 - 2,848 Total accumulated depreciation - 18,521 - 27,695 Capital assets,net of accumulated depreciation $ 327,535 $ 357,599 $ - $ 685,134 7 A 1 City of Spokane Valley Notes to Financial Statements NOTE 6—CAPITAL ASSETS AND DEPRECIATION(continued): Depreciation expense was charged to current functions of the primary government as follows: Governmental Activities: General Government $ 286,139 Public Safety 12,556 Physical environment 60,337 Transportation 12,572,870 Economic environment 3,611 Culture and Recreation 452,307 Total governmental activities current year depreciation expense $ 13,387,820 Business-type activity: StormWater $ 18,521 Total business-type activities current year depreciation expense $ 18,521 Construction commitments The City of Spokane Valley has active construction projects as of December 31,2007. The projects include various street construction projects with a total of$11,171,682 contracts in place. At year end the City's commitments with contractors are as follows: Remaining Spent-to-Date Commitments Various street construction projects $ 4,146,830 $ 7,024,852 The various street construction projects are being funded by state and local grants,as well as, existing resources in various City Funds. NOTE 7—PENSION PLANS: Substantially all City of Spokane Valley full-time and qualifying part-time employees participate in one of the following statewide retirement systems administered by the Washington State Department of Retirement Systems, under cost-sharing multiple-employer public employee defined benefit and defined contribution retirement plans. The Department of Retirement Systems(DRS),a department with the primary government of the State of Washington, issues a publicly available comprehensive annual financial report(CAFR)than includes financial statements and required supplementary information for each plan. The DRS CAFR may be obtained by writing to: Department of Retirement Systems, Communications Unit,P.O.Box 48380, Olympia, WA 98504-8380. The following disclosures are made pursuant to GASB Statement 27,Accounting for Pensions by State and Local Government Employers. Public Employees' Retirement System(PERS)Plans 1,2,and 3 Plan Description PERS is a cost-sharing multiple-employer retirement system comprised of three separate plans for membership purposes; Plans 1 and 2 are defined benefit plans and Plan 3 is a combination defined benefit/defined contribution City of Spokane Valley Notes to Financial Statements NOTE 7—PENSION PLANS(continued): plan. Membership in the system includes;elected officials, state employees, employees of the Supreme,Appeals, and Superior Courts (other than judges in a judicial retirement system), employees of legislative committees, community and technical colleges, college and university employees(not in national higher education retirement programs),judges of district and municipal courts, and employees of local governments. PERS participants who joined the system by September 30, 1977 are Plan 1 members. Those joined on or after August 31, 2002 for local government employees, are Plan 2 members unless they exercise an option to transfer their membership to Plan 3. PERS participants joining the system on or after September 1, 2002 for local government employees have the option of choosing membership in either PERS Plan 2 or PERS Plan 3. The option must be exercised within 90 days of employment.An employee is reported in Plan 2 until a choice is made. Employees who fail to choose within 90 days default to PERS Plan 3. PERS defined benefit retirement benefits are financed from a combination of investment earnings and employer and employee contributions. Retirement benefit provisions are established in state statute and may be amended by the State Legislature. PERS Plan 1 retirement benefits are vested after an employee completes five year of eligible service. Plan 1 members are eligible for retirement at any age after 30 years of service,or at age 60 with five years of service or at the age of 55 with 25 years of service. The annual pension is 2% of the average final compensation per year of service, capped at 60%. The average final compensation is based on the greatest compensation during any 24 eligible consecutive compensation months. If qualified, after reaching the age of 66 a cost-of-living allowance is granted based on years of service and is capped at 3%annually,to offset the cost of this annual adjustment,the benefit is reduced. PERS Plan 2 retirement benefits are vested after an employee completes five years of eligible service. Plan 2 members may retire at the age of 65 with five years of service, or at the age of 55 with 20 years of service,with an allowance of 2% of the average final compensation per year of service. The average final compensation is based on the greatest compensation during any eligible consecutive 60-months period. Plan 2 retirements prior to the age of 65 receive reduced benefits. If retirement is at age 55 or older with at least 30 years of service,a 3%per year reduction applies; otherwise an actuarial reduction will apply. There is no cap on years of service credit; and a cost-of-living allowance is granted(indexed to the Seattle Consumer Price Index),capped at 3%annually. PERS Plan 3 has a dual benefit structure. Employer contributions finance a defined benefit component, and member contributions finance a defined contributions component. The defined benefit portion provides a benefit calculated at 1%of the average final compensation per year of service. The average final compensation is based on the greatest compensation during any eligible consecutive 60-month period. Effective June 7, 2006,Plan 3 members are vested in the defined benefit portion of their plan after ten years of service; or five if twelve months that were earned after age 44; or after five service credit years earned in PERS Plan 2 prior to June 1, 2003. Plan 3 members are immediately vested in the defined contribution portion of their plan. Vested Plan 3 members are eligible to retire with full benefits at age 65,or at age 55 with 10 years of service. Retirements prior to age 65 receive reduced benefits. If retirement is at age 55 or older with at least 30 years of service, a 3%per year reduction applies; otherwise an actuarial reduction will apply. The benefit is also actuarially reduced to reflect the choice of a survivor option. There is no cap on years of service credit; and Plan 3 provides the same cost-of-living allowance as Plan 2. The defined contribution portion can be distributed in accordance with an option selected by the member, either as a lump sum or pursuant to other options authorized by the Employee Retirement Benefits Board. City of Spokane Valley Notes to Financial Statements — NOTE 7—PENSION PLANS continued: There are 1,188 participating employers in PERS. Membership in PERS consisted of the following as of the latest actuarial valuation date for the plans,as reported by The Washington State Department of Retirement Systems (DRS) as of September 30,2006: Retirees and beneficiaries receiving benefits 75$ 70,201 2 Terminated plan members entitled to but not yet receiving benefits 105,215 Active plan members vested 05,215 Active plan members non-vested $ 250,838 Total Funding Policy Each biennium,the state Pension Funding Council adopts Plan 1 employer contribution rates,Plan 2 employer and employee contribution rates, and Plan 3 employer contribution rates. Employee contribution rates for Plan 1 are established by statute at 6.0%for state agencies and local government unit employees,and 7.5%for state government elected officers. The employer and employee contribution rates for Plan 2 and the employer contribution rate for Plan 3 are developed by the Office of the State Actuary to fully fund Plan 2 and defined benefit portion of Plan 3. All employers are required to contribute at the level established by the Legislature. PERS Plan 3 defined contribution is a non-contributing plan for employers. Employees who participate in the defined contribution portion of PERS Plan 3 do not contribute to the defined benefit portion of PERS Plan 3. The Employee Retirement Benefits Board set Plan 3 employee contribution rates. Six rate options are available ranging from 5 to 15 percent;two of the options have graduated rates dependant on the employee's age. The methods used to determine the contribution requirements are established under state statute in accordance with chapters 41.40 and 41.45 RCW. Required contribution rates(expressed as a%of current year covered payroll)at the close of DRS fiscal year 2007 were as follows: PERS Plan 1 PERS Plan 2 PERS Plan 3 6.13% 6.13%** Employer* 6.13% 4.15% *** Employee 6.00% * The employer rates include the employer administrative expense fee currently set at 0.16%. ***Plan 3 defined benefit portion only. ***Variable form 5.0%minimum to 15.0%maximum based on rate selected by PERS 3 member. Both the City of Spokane Valley and the employees made the required contributions. The City of Spokane Valley required contributions for the years ending December 31,2007 were as follows. PERS Plan 1 PERS Plan 2 PERS Plan 3 2007 Employer Contributions $11,380 $142,325 $46,987 3 2006 Employer Contributions 3,238 63,233 2005 Employer Contributions 1,284, ,91,765 1,765 1 18,910 7,315 2004 Employer Contributions 284 10,567 3,448 2003 Employer Contributions 17 City of Spokane Valley Notes to Financial Statements NOTE 8—RISK MANAGEMENT: The City of Spokane Valley is exposed to financial loss resulting from City-caused damage to property or persons, bodily injuries or illness of employees, and unemployment compensation. The City is insured and a member of the Washington Cities Insurance Authority(WCIA)for general liability and property damage coverage. The City uses the Washington State Department of Labor and Industries Insurance Services for coverage to pay for medical care for job-related injuries and illnesses, and wage replacement when the injury or illness is serious enough to miss work. The City is self-insured for unemployment compensation benefits. The Risk Management Fund is used to account for, and finance the liability and unemployment insurance costs. Departments of the City make payments through interfund assessments to the fund on estimates of the amounts needed to pay prior and current year claims. Utilizing Chapter 48.62 RCW(self-insurance regulation)and Chapter 39.34 RCW(Interlocal Cooperation Act), nine cities originally formed WCIA on January 1, 1981. WCIA was created for the purpose of providing a pooling mechanism for jointly purchasing insurance,jointly self-insuring, and/or jointly contracting for risk management services. WCIA has a total of 126 members. New members initially contract for a three-year term, and thereafter automatically renew on an annual basis. A one-year withdrawal notice is required before membership can be terminated. Termination does not relieve a former member from its unresolved loss history incurred during membership. Liability coverage is written on an occurrence basis, without deductibles. Coverage includes general,automobile, police professional,public officials' errors and omissions, stopgap, and employee benefits liability. Limits are$3 million per occurrence self insured layer, and$12 million per occurrence in the re-insured excess layer. The excess layer is insured by the purchase of reinsurance and insurance and is subject to aggregate limits. Total limits are$15 million per occurrence subject to aggregate sublimits in the excess layers. The Board of Directors determines the limits and terms of coverage annually. Insurance coverage for property, automobile physical damage, fidelity, inland marine, and boiler and machinery are purchased on a group basis. Various deductibles apply by type of coverage.Property insurance and auto physical damage are self-funded from the members' deductible to$500,000,for all perils other than flood and earthquake and insured above that amount by the purchase of reinsurance. In-house services include risk management consultation, loss control field services, claims and litigation administration and loss analyses. WCIA contracts for the claims investigation consultants for personnel issues and land use problems, insurance brokerage and lobbyist services. WCIA is fully funded by its members, who make annual assessments on prospectively rated basis, as determined by an outside independent actuary. The assessments cover loss, loss adjustment, and administrative expenses.As outlined in the interlocal, WCIA retains the right to additionally assess the membership for any funding shortfall. An investment committee,using investment brokers produces additional revenue by investment of WCIA's assets in financial instruments which comply with State guidelines. These revenues directly offset portions of the membership's annual assessment. A Board of Directors governs WCIA which is comprised of one designated representative from each member. The Board elects an Executive Committee and appoints a Treasurer to provide general policy direction for the organization. The WCIA Executive Director reports to the Executive Committee and is responsible for conducting the day to day operations of the WCIA. TO 1 City of Spokane Valley Notes to Financial Statements NOTE 8—RISK MANAGEMENT continued : The City is self-insured on a reimbursement basis for unemployment compensation. The City incurred$4,352 in claims for unemployment compensation in 2007. NOTE 9—INTERFUND BALANCES AND TRANSFERS: • Interfun_ d Balancers Due to other funds and due from other funds result from goods issued,work performed or services rendered to or for the benefit of another fund of the same government. The amount of interfund loans payable within one year is also included in due to and due from other funds. Due to other fund and due from other fund balances at December 31, 2007 were: Due from Due to Other Funds Other Funds $ 607,959 $ 4,800 General Fund Fund 4,800 190,000, Street F 19400 210,000 Arterial Street Fund - 173,000 Capital Projects Fund 100,000 Special Capital Projects Fund 54,000 Street Capital Projects Fund 01504,000 216,938 147,421 Capital Grants Fund _ Baker Bridge Reconstruction 25,,42 000 Parks Capital Projects Fund 25,000 Proprietary funds $ 967,159 $ 967,159 Total government wide flrterfund transfers are the flow of assets with a reciprocal return of assets, goods,or services in return.The City uses transfers to(1)move revenues from the fund that stature or budget to collect the uha statute or budget requires to expend them,(2) receipts restricted to debt lam the funds collecting the receipts to the debt service payments (3)use unrestricted revenues collected in the general and street funds to finance various programs accounted for ino other fundsinaccordance with budgetary authorizations. 19 City of Spokane Valley Notes to Financial Statements NOTE 9—INTERFUND BALANCES AND TRANSFERS continued: Interfund transfer activity for 2007 is as follows: Transfers In Transfers Out General Fund $ 74,300 $6,023,903 Street Fund 900,000 59,300 Arterial Street Fund - 230,019 Service Level Stabilization Fund 361,000 - Civic Facilities Replacement Fund 397,000 - Debt Service Fund 186,490 - Capital Projects Fund - 555,756 Special Capital Projects Fund - 93,245 Street Capital Projects Fund 462,511 - Capital Grant Fund 230,019 - Park Capital Project Fund 410,000 - Civic Building Fund 3,779,000 - Stormwater Fund 15,000 Risk Management Fund 176,903 - Transfer of capital assets to 257,564 - governmental funds Internal service Funds - 257.564 Total government wide 57,234,787 $7,234,787 NOTE IO—SHORT-TERM DEBT: As of December 31,2007, the City had no short-term debt. NOTE II—LONG-TERM DEBT AND LEASES: General Obligation Bonds The City issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities. General obligation bonds have been issued for governmental-type activities. General obligation bonds are direct obligations and pledge the full faith and credit of the government. General obligation bonds are either created by 315th majority vote of the people and,therefore,financed by a special tax levy; or created by ordinance,adopted by the City Council,and normally financed from general revenues(councilmanic bonds). General obligation bonds currently outstanding are as follows: In 2003, the City issued$9,430,000 in councilmanic bonds to finance the construction of the CenterPlace Community Center and for various street construction projects. The City does expect to receive intergovernmental payments from the Spokane Public Facilities District pursuant to an inter-local agreement dated as of July 2003, which if and when received by the City will be available for debt service associated with the Center for up to$7 million of bonds. 7n City of Spokane Valley Notes to Financial Statements NOTE 11—LONG-TERM DEBT AND LEASES(continued): General obligation bonds currently outstanding as December 31, 2007 are as follows: Debt Name of Issuance Purpose Interest Rate Outstanding 2003 LTGO Bonds Governmental Activities 2.00%- 5.00% $8,760,000 The amoral debt service requirements to maturity for general obligation bonds are as follows: Governmental Activities Total Principal Interest Requirements 2008 $ 190,000 $ 406,872 $ 596,872 2009 205,000 401,173 606,173 2010 210,000 395,022 605,022 2011 225,000 386,622 611,622 2012-2016 1,350,000 1,786,113 3,136,113 2017-2021 1,995,000 1,458,423 3,453,423 2022-2026 2,580,000 884,750 3,464,750 2027-2031 1,585,000 320,750 1,905,750 2032-2033 420,000 32,500 452,500 $ 8,760,000 $ 6,072,225 $14,832,225 Long-term debt on the Statement of Net Assets is presented net of any premium/discount incurred at the time of issuance. The 2003 LTGO Bonds were sold at a premium of$189,974 and were reported at the net amount of $9,619,974. The premium will be amortized over the life of the bonds and the outstanding liability balance as of December 31,2007 is: $160,711. Changes in Long-Term Liabilities During the year ended December 31, 2007,the following changes occurred in long-term liabilities: Governmental Balance Balance Due Within Activities Jan. 1,2007 Additions Reductions Dec. 31,2007 One Year General obligation bonds $ 8,945,000 $ - $ 185,000 $ 8,760,000 $ 190,000 Premium 168,027 - 7,316 160,711 7,316 Note payable 1,222,540 - 1,222,540 - Compensated absences 161,838 26,601 18.201 170,238 8,400 Governmental activity Long-term liabilities $10,497,405 $ 26,601 $ 1,433,057 $ 9,090,949 $ 205,716 City of Spokane Valley Notes to Financial Statements • NOTE 11—LONG-TERM DEBT AND LEASES(continued): Legal Debt Margin RCW 39.36.020 provides cities with three seg cents of debt capacity,each equal to two and one-half percent of the city's assessed valuation, for a total debt capacity of seven and one-half percent. The assessed valuation of the City for the year 2007 for purposes of determining the legal debt margin is $5,882,946,173. Under State of Washington statutes general obligation indebtedness pursuant to a vote of the electorate is limited to 2.5% of actual value of taxable property located within the City. Indebtedness without a vote of the people is limited to 1.5% of actual value subject to the limitation that total general purpose indebtedness may not exceed 2.5%of total valuation. There is a 2.5%limitation each for utility purposes and open space and park facilities purposes. • The remaining debt capacities of the City at December 31, 2007 are as follows: Amount General Purposes Voted and Non-voted Debt—2.5%(1) $ 138,143,416 Utility Voted Debt—2.5% 147,073,654 Open Space and Park Facilities Voted Debt-2.5% 147,073,654 Total Remaining Debt Capacity $432,290,724 (1)Includes$79,313,955 debt capacity for non-voted debt. Note Payable—The City entered into a purchase agreement with Spokane County for purchase of the Spokane Valley Precinct Building. The note with a balance of$1,222,540 was paid in full as of December 31, 2007. Leases Operating Leases—The City renewed its operating lease agreement with Northwest Christian Schools for the rental of office space on March 15, 2005. The lease agreement is for a five(5)year term ending March 31,2010. Rental rates vary between$14.75 and$16.75 per square foot per annum. Lease payments for the fiscal year ending December 31, 2007 amounted to $351,226. Schedule of Minimum Future Rental Payments Year Ended Dec.31 Amount 2008 $ 430,323 2009 450,187 2010 112,660 Total minimum future rental payments $993,170 City of Spokane Valley Notes to Financial Statements NOTE 12—SUBSEQUENT EVENT: In January 2007,the City hired an architectural firm to begin renovation on the three City of Spokane Valley pools. Renovations were started in fall of 2007 and are expected to be completed spring 2009.The estimated costs for construction of the project range from $1.6 to$2.6 million with Spokane County contributing$1.6 million. A review of services provided under contract and costs paid to the Spokane County Sheriffs Office for law enforcement during fiscal year 2006, appear to indicate that the City of Spokane Valley may have been overbilled between$600,000 and$1,500,000.Negotiations are undenvay to determine the accuracy of this information and to recover any prior overpayments. Spokane County has been leasing space in the City of Spokane Valley police precinct building since June 1,2007. While no fmal decision has been made, it appears Spokane County may discontinue use of their lease space and the corresponding share of maintenance costs.Rental income to the City of Spokane Valley was $98,000 in 2008.The county's share of maintenance was$50,000 in 2008. During fiscal year 2008, Spokane County agreed to award$300,000 annually in Community Development Block Grant Funds to the City of Spokane Valley beginning in fiscal year 2009.The City of Spokane Valley has participated as a member of a consortium in Spokane County but,was required to compete for available funding. In lieu of separating from the Valley agreed that 300 000 was aleasonable automatically hare of Community Development Block Grant the Funds. of Spokane Also,the New City Hall design is underway and spending is estimated at$75,000 in 2008.Barker Road Bridge project was officially awarded $9,449,355 on June 2008,through a Federal funded grant program with the potential of$10 million in maximum grant revenue proceeds. NOTE 13—CONTINGENCIES AND LITIGATION: In the normal course of governmental operations the City has claims filed against it for various losses related to tort actions for such things as wrongful acts, injuries, or damages for which a civil action can be brought, and other routine legal proceedings. At any given point in time,there is a recurring volume of tort and other claims for compensation and damages against the City,which could impact expenditures. The City's Risk Management fund provides for these claims, and insurance is available to pay a portion of damages for certain types of claims. The collective impact of these claims is not likely to have a material impact on the City's financial position. The City participates in a number of federal-and-state assisted programs. These grants are subject to audit by the grantors or their representatives. Such audits could result in requests for reimbursement to grantor agencies for expenditures disallowed under the terms of the grants. City management does not believe that such disallowances, if any,will be material. During fiscal year 2003,the City of Spokane Valley acquired 31 acres of land from Spokane County to be used for a city park.After acquisition, it was determined that a concrete company on the adjacent parcel had inadvertently contaminated the acquired property of the City because of confusion over property lines. The concrete company has agreed to assist the City of Spokane Valley in cleaning the contaminated City property. The concrete company is currently preparing a plan which will be subject to state review and approval for cleanup of this property.No formal agreement has been signed by the parties and an estimate of cleanup costs has not been formally prepared. 23 City of Spokane Valley Notes to Financial Statements NOTE 14-RESTRICTED NET ASSETS: The governmental-wide statement of net assets reports $16,229,680 of restricted net assets,of which$16,229,680 is restricted by City Council. NOTE 15-RECEIVABLE AND PAYABLE BALANCES: A)Receivables Receivables at December 31, 2007 were as follows: 1 Governmental Type Accounts Taxes Grants Due from Other Total Activities receivable(net) receivable receivable other funds receivables receivables General fund $ 479,430 $ 1,988,808 $ - $ 607,959 $ 61,625 3,137,822 Street fund 41 167,898 - 4,800 13,459 186,198 1 Service level stablization reserve - - - - 17,812 17,812 Capital projects fund - 89,784 - - 14,784 104,568 1 Special capital projects fund - 89,784 - 100,000 16,785 206,569 Street capital projects fund 175,952 - 397,748 54,000 - 627,700 i Civic buildings capital projects fund - - - - 19,583 19,583 Other Governmental fiords 60,502 31,377 689,222 175,400 16,312 972,813 Total Governmental type activities $ 715,925 $ 2,367,651 $ 1,086,970 $ 942,159 $ 160,360 5,273,065 Business Type Accounts Taxes Due from Other Total Activities receivable(net) receivable other funds receivables receivables Stormwater management fund $ 4,071 $ 54,781 $ 25,000 $ 6,972 $ 90,824 Total Business type activities $ 4,071 $ 54,781 $ 25,000 $ 6,972 $ 90,824 1 City of Spokane Valley Notes to Financial Statements NOTE 15-RECEWABLE AND PAYABLE BALANCES continued: B)Payables Payables at December 31,2007 were as follows: Governmental Type Accounts Salaries& Due to Deposits Other Activities payables beneifits payable other funds payables liabilities Total General fund $ 1,802,344 $ 277,015 $ 4,800 $ 87,676 $ 341,768 2,513,603 Street fund 427,137 12,539 190,000 - 629,676 Capital projects fund - - 173,000 - 173,000 Street capital projects fund 268,370 1,337 - - 494,309 764,016 Other Governmental funds 367,534 - 599,359 - 48,038 1,014,931 Reconciliation of balances in the fund financial statements to government-wide financial statements 14,490 - - - 8,250,510 8,265,000 Total Governmental type activities $ 2,879,875 $ 290,891 $ 967,159 $ 87,696 $ 9,134,625 $ 13,360,226 Business Type Accounts Salaries& Deposits Other Activities payables beneifits payable payables liabilities Total Stormwater management fund $ 55,830 $ 9,662 $ 32,100 $ 54,781 S 152,373 Total Business type activities $ 55,830 $ 9,662 $ 32,100 $ 54,781 S 152,373 City of Spokane Valley Notes to Financial Statements NOTE 15—PRIOR PERIOD ADJUSTMENT: The City of Spokane Valley discovered a long-term liability for Premium on bond issuance was overstated by $4,843 in the Statement of Net Assets for the year ended December 31,2006. Therefore, expense was overstated in the governmental funds. The result of the adjustment to net assets is as follows: Governmental Fund-Type Net assets as reported December 31,2006 $ 89,188,086 Correction of Premium on bond issuance 4,843 Total prior period adjustment 4,843 Net assets at December 31,2006,as restated: $ 89,192,929 Ili City of Spokane VaH y, Washington Comprehensive Annual Finawoiai Report = F2isca9 Year 2007 This page is intentionally blank. City of Spokane Valley, Washington Comprehensive Annual Financial Report- Fiscal Year 2007 in equored Supplementary l h ;formati,*.n City of Spokane Valley, Wasleer?wtorn Schedule of Revenues, Expenditures and Changes in Fund Balances General Fund e Budget to Actual For the Year Ended December 31, 2007 Budgeted Amounts Variance with Approved Final Final Budget Original Budget Amended Budget Actual Over(Under) Revenues Taxes $ 28,341,800 $ 29,641,800 $ 30,444,247 $ 802,447 Licenses and permits 1,186,170 2,382,955 2,515,588 132,633 Intergovernmental revenues 1,121,000 1,231,000 906,126 (324,874) Charges for services 1,168,000 557,463 786,731 229,268 Fines and forfeitures 1,250,000 512,052 580,871 68,819 Investment interest 250,000 574,200 525,182 (49,018) Miscellaneous 460,500 945,000 1,279,304 334,304 Total Revenues - 33,777,470 35,844,470 37,038,049 1,193,579 Expenditures Current: General government 6,319,755 12,345,355 4,409,039 (7,936,316) Public safety 18,256,400 17,731,571 16,272,590 (1,458,981) Physical environment 902,887 990,887 1,528,125 537,238 Transportation 38,953 38,953 Economic environment 1,374,827 1,511,276 1,757,693 246,417 Culture and recreation 1,696,186 1,697,086 1,966,247 269,161 Capital Outlay: Capital expenditures .664,449 371,329 75,217 (296,112) Construction in progress - Total Expenditures 29,214,504 34,647,504 26,047,864 (8,599,640) Excess(Deficiency) of Revenues 4,562,966 1,196,966 10,990,185 9,793,219 Over(Under)Expenditures Other]Financing Sources(Uses) Transfers in 80,000 115,000 74,300 (40,700) Transfers(out) (2,335,000) (6,072,000) (6,023,903) (48,097) Total Other Financing Sources(Uses) (2,255,000) (5,957,000) (5,949,603) (7,397) Net Change in Fund Balances 2,307,966 (4,760,034) 5,040,582 9,800,616 Fund Balances Beginning of Year, restated: 5,050,000 12,118,000 8,711,456 (3,406,544) Fund Balances End of Year,as restated: $ 7,357,966 $ 7,357,966 $ 13,752,038 $ 6,394,072 The notes to the financial statements are an integral part or this statement. (City of Spokane Valley, Washington nn Schedule of Revenues, Expenditures and Changes in Fund Balances Budget and Actual Street Fund, Major Fund For the Year Ended December 31, 2007 Budgeted Amounts Variance with Approved Final Final Budget Original Budget Amended Budget Actual Over(Under) Revenues Taxes $ - $ - $ 2,280 $ 2,280 Intergovernmental revenues 2,000,000 2,000,000 2,125,779 125,779 Charges for services - - 8,332 8,332 Investment interest 100,000 100,000 236,643 136,643 Miscellaneous - - 6,352 6,352 Total Revenues 2,100,000 2,100,000 2,379,386 279,386 Expenditures Current: Transportation 4,004,755 4,242,755 4,169,946 (72,809) Capital Outlay: Capital expenditures - - 25,649 25,649 Construction in progress - - - - Total Expenditures 4,004,755 4,242,755 4,195,595 (47,160) Excess (Deficiency) of Revenues (1,904,755) (2,142,755) (1,816,209) 326,546 Over(Under) Expenditures If Other Financing Sources(Uses) Transfers in 900,000 900,000 900,000 - Transfers(out) (83,617) (883,617). (59,300) (24,317) Total Other Financing Sources (Uses) 816,383 816,383 840,700 (24,317) Net Change in Fund Balances (1,088,372) (1,326,372) (975,509) 350,863 Fund Balances Beginning of Year 4,658,000 4,658,000 4,694,268 36,268 Fund Balances End©f Year $ 3,569,628 $ 3,3311,628 $ 3,718,759 $ 387,131 The notes to the financial statements are an integral part of this statement ay of SpokQiw Miley, Washington Sched¢de of Revenues, Expenditures and Changes in Fund Balances Budget and Actual Service Level Stabilization Fund, Major Fund For the Year Ended December 31, 2007 Budgeted Amounts Variance with Approved Final Final Budget Original Amended Budget Actual Over(Under) Revenues $ $ $ Taxes Intergovermnentalrevenues _ 200,000 - Charges for services 200,000 261,878 61'878 Investment interest _�_ Miscellaneous — 200,000 200,000 261,878 61,878 Total Revenues ---- Expenditures Current: 5,200,000 (5,200,000) Transportation 5,200,000 Capital Outlay: Capital expenditures _ - Construction in progress ---- 5 200,000 - (5 Total Expenditures �00 ---- Excess(Deficiency) of Revenues (--95 000,000) (5,000,000) 261,878 5,261,878 Over(Under) Expenditures Other lananeing Sources(Uses) 361,000 361,000 - -Transfers in Transfers(out) 361,0000 Total Other Financing Sources (Uses) 5,000,000 622,878 5,622,878 Net Change in Fund Balances (5,000,000) (5,000,000) 5 000 000 5,000,000 4,620,022 (379,978) Fund Balances Beginning of Year > Fund Balances End of Year 5 5 - 5 5,242,900 5 5,242,900 • The notes to the financial statements are an integral part of this statement. CCh' of Spokane Valley, Washington Schedule of Revenues, Expenditures and Changes in Fund Balances Budget and Actual Capital Projects ojects Fund, Major Fund For the Year Ended December 31, 2007 Budgeted Amounts Variance with Approved Final Final Budget Original Budget Amended Budget Actual Over(Under) Revenues Taxes $ 1,000,000 $ 1,000,000 $ 1,300,965 $ 300,965 Intergovermnental revenues Charges for services - Investment interest 120,000 120,000 213,937 93,937 Miscellaneous - _ - _ Total Revenues 1,120,000 1,120,000 1,514,902 394,902 Expenditures Current: Transportation - - - Capital Outlay: Capital expenditures 1,421,691 1,421,691 - (1,421,691) Construction in progress _ _ - _ Total Expenditures 1,421,691 1,421,691 - (1,421,691) Excess(Deficiency) of Revenues (301,691) (301,691) 1,514,902 1,816,593 Over(Under)Expenditures Other Financing Sources(Uses) Transfers in - Transfers(out) (2,698,309) (2,698,309) (555,756) (2,142,553) Total Other Financing Sources(Uses) 2,698,309 g (l1 ) ( ). (555,756) (2,142,553) Net Change in Fund Balances (3,000,000) (3,000,000) 959,146 3,959,146 Fund Balances Beginning of Year 3,000,000 3,000,000 3,488,451 488,451 Fund Balances End of Year $ - $ - $ 4,447,597 $ 4,447,597 The notes to the financial statements are an integral part of this statement • City of Spokanne Valley, Washington Schedule of Revenues, Expenditures and Changes in Fund Balances Budget and Actual Special capital Projects Fund, Major Fund For the Year Ended December 31, 2007 Budgeted Amounts Variance with Approved Final Final Budget Original dget Amender Actual Over(Under) Revenues $ 1,000,000 $ 1,000,000 $ 1,288,715 $ 288,715 Taxes _ _ - bitergovenunentalrevenues - Charges for services 120,000 226,705 106,705 120,000 Investment interest - - Miscellaneous Total Revenues _____ 120 000 1,120,000 1,515,420 X20 Expenditures Current: - - Transportation Capital Outlay: 2,443,157 2,443,157 (2,443,157) Capital expenditures _ Construction in progress —57 57 (2,443,157) Total Expenditures -- =-2— .---'— Excess (Deficiency) of Revenues (1 3_ 23,157) (-- (1,323,157) 1,515,420 2,838,577 Over(Under) Expenditures Other Financing Sources(Uses) Transfers in (1,976,843) (1,976 843) (93,245) (1_ 883,598) Transfers(out) 93,245 (1,883,598) (1,976,843) (1,9 76,843) (93,245) --- Total Other Financing Sources (Uses) 3,300,000 1,422,175 4,722,175 Net Change in Fund Balances (3,300,000) ( ) Fund Balances Beginning of Year 3,300,000 3,300,000 3,714,285 414,285 $ $ 5,136,4N $ 5,136,460 Fund Balances End of Year $ The notes to the financial statements are an integral part of this statement. City of Spokane Valley, Washington Schedule of Revenues, Expenditures and Changes in Fund Balances Budget and Actual Street Capital Projects Fund, Major Fund For the Year Ended December 31, 2007 Budgeted Amounts Variance with Approved Final Final Budget Original Budget Amended Budget Actual Over(Under) Revenues Taxes $ - $ - $ - $ Intergovernmental revenues 3,650,691 3,927,691 578,483 (3,349,208) Charges for services - Investment interest - Miscellaneous - 343,000 40,459 (302,541) Total Revenues 3,650,691 4,270,691 618,942 (3,651,749) Expenditures Current: Transportation - - - - Capital Outlay: Capital expenditures - - 561,888 561,888 Construction in progress 6,939,843 7,802,843 468,188 (7,334,655) Total Expenditures 6,939,843 7,802,843 1,030,076 (6,772,767) 1 Excess(Deficiency) of Revenues (3,289,152) (3,532,152) (411,134) (3,121,018) Over(Under)Expenditures I Other Financclug Sources(Uses) Transfers in 3,289,152 3,532,152 462,511 (3,069,641) Transfers(out) - I Total Other Financing Sources (Uses) 3,289,152 3,532,152 462,511 (3,069,641) Net Change in Fund Balances - - 51,377 51,377 Fund Balances Beginning of Year - - (171,637) _ (171,637) Fund Balances End of Year $ - $ - $ (120,260) $ (120,260) II The notes to the financial statements are an integral part of this statement. I City of Spokane Valley, Washington Schedule of Revenues, Expenditures and Changes in Fund Balances Budget and Actual Civic Buildings Capital Projects Fund, Major Fund • For the Year Ended December 31, 2007 Budgeted Amounts Variance with Approved Final Final Budget Original Budget Amended Budget Actual Over(Under) Revenues Taxes $ - $ - $ - $ - Intergovernmental revenues - - -Investment interest 30,000 30,000 234,106 204,106 Miscellaneous - - - - Total Revenues 30,000 30,000 234,106 204,106 Expenditures Current: Debt service: Principal retirement - - 873,477 873,477 Interest expense - - - - Capital Outlay: Capital expenditures 1,460,000 2,893,000 - (2,893,000) Construction in progress - - - - Total Expenditures _ 1,460,000 2,893,000 873,477 (2,019,523) Excess (Deficiency) of Revenues (1,430,000) (2,863,000) (639,371) 2,223,629 Over(Under) Expenditures Other Erimancimg Sources(Uses) Transfers in 600,000 2,033,000 3,779,000 1,746,000 Transfers(out) - - - - Total Other Financing Sources (Uses) 600,000 2,033,000 3,779,000 1,746,000 Net Change in Fund Balances (830,000) (830,000) 3,139,629 3,969,629 Fund Balances Beginning of Year 830,000 830,000 2,642,849 1,812,849 Fund Balances End of Year $ - $ - $ 5,782,478 S $ 5,782,478 The notes to the financial statements are an integral part of this statement. City of Spokane Valley, Washington Comprehensive Annual Financial Report o Fiscal Year 2007 Suppllouoflt&rte lMMorrmeiof City of Spokane Valley, Washington Comprehensive Annual Financial Report Fiscal Year 2007 Non-Major Sped& Revenue Funds Special Revenue Funds: are used to account for revenues that are legally restricted or designated to finance expenditures for particular activities of the City of Spokane Valley. Arterial Street Special Revenue Fund This fund accounts for receipts and expenditures of the State Levied motor vehicle fuel tax distributed to the City in accordance with the State Revised Codes of Washington (RCW 82.36.020.).These revenues are also, transferred to the Street Capital Projects Fund for construction projects. Trails&Paths Special Revenue Fund accounts for the receipts and expenditures from the State-Levied motor vehicle fuel tax distributed to the City according to State RCW 47.30.050. These revenues originate from a share of.42%from the motor vehicle fuel tax that's attributable to Street Maintenance. These funds are restricted for the purpose of constructing and maintaining new trails and paths throughout the City. Hotel/Motel Special Revenue Fund— accounts for both receipts and expenditures related to a special excise tax of two percent from the sale or charge made of furnishing lodging under State RCW 67.28.180. These funds are solely used for the purpose of paying all or any part of the cost from tourist promotion, acquisition or operation of tourism related facilities, and marketing those special events and festivals designed to attract more attention to the City increasing tourism. CenterPlace Operating Reserve Fund This fund is to provide emergency revenue sources for the recently completed CenterPlace facility. Winter Weather Reserve Fund allocated reserve of money and financial resources specifically designated for the purpose of providing emergency infrastructure services during extreme and harsh winter weather. Civic Facilities Replacement Fund allocated reserve of money and financial resources specifically established for the purpose of setting aside replacement funds for the City's Buildings. I Non Ma)FD's Descript Spec Rev12:54 PM 1/9/2009 City of Spokane Valley, Washington Comprehensive Annual Financial Report= Fiscal Year 2007 Non-Major Debt Service Funds Debt Service Funds: account for financial resources accumulated for the purposes of payment of general long-term debt of both principal and interest of the City of Spokane Valley. Debt Service LTGO '03 Fund The City of Spokane Valley's Debt Service Fund collects and distributes financial resources received and paid for the payment of long-term debt obligations. Revenue consists of funding received from the Public Facility District and City revenue.These resources are used to pay the annual obligations on outstanding bonds. Non Maj FD's Descript Debt Serv12:54 PM 1/9/2009 City of Spokane Valley, Washington Comprehensive Annual Financial Report a Fiscal Year 2007 Von-Major Capital Project Funds Capital Project Funds: are used to account for financial resources through acquisition or construction of major capital facilities, improvements, and infrastructure, other than those financed by proprietary funds. Mirabeau Point Capital Project Fund The City of Spokane Valley's Mirabeau Capital Project Fund is a multi-use regional project located at 2426 Discovery Place which is operated by the City. Funding arises from bond sale proceeds that were spent in the following years:2003, 2004, and 2005. CenterPlace provides space for a conference Center Wing, Senior Center Wing, and a Great Room Wing. The portion of Center- Place used for the Conference Center and Great Room Wings is being developed as a"Regional Center Facility"as defined in the State Revised Codes of Washington (RCW 36.100 and RCW 35.57.020.). Capital Grants Fund Accounts for capital improvement projects funded partially by grant proceeds from other outside governmental agencies, TIB (Transportation Improvement Board), STA(Spokane Transportation Authority), STP, and CDBG. Revenues to this fund are also from grant proceeds and transfers from other special revenue funds. Street Bond Fund This fund receives revenue proceeds from the sale of bonds for street repair and maintenance. Funds are also transferred to other capital projects as directed. Community Development(CD)Block Grant Fund Federal Grant resources are received as part of the Federal Community Development Block Grant Program. Barker Road Bridge Reconstruction Fund Federal Grant resources are used to account for the revenues and expenses associated with the Barker Road Bridge Replacement Project. This project is fully funded by BRAC grant proceeds and will cost approximately$8,000,000 over the next few years. Parks Capital Projects Fund is an allocated reserve of money and financial resources specifically designated for the Parks and Recreational Capital plans including: expansion, improvements, and maintenance. Non MaJ FD's Descript Cap Proj12:54 PM 1/9/2009 City of Spokane Valley, Washington Comprehensive Annual Financial Report - Fiscal Year 2007 Combining Fi ancial Statements Non-Major Funds City of Spokane Valley, Washington Combining Balance Sheet Non-major Governmental Funds December 31, 2007 Non-major Non-major Non-major Total Special Debt Capital Service Projects Governmental Revenue Funds Fund Funds Funds Assets 1,448,287 $ 4,107,146 Cash and cash equivalents $ 2,658,859 $377 ,377-- 3 Taxes receivable 31, _ 60,502 311,377 Accounts receivable, (net) 0,502 13,650 9,111 - 113,650 Due from 19,400 - 156,000 Due from other funds B89 P22 689,222- Assets Grants receivable - $ 2,358,550 $ 5,077,297 Total A $ 2,718,747 $ Liabilities and Fund Balances Liabilities: 211,088 $ 367,534 $ 156,446 $ 17,365 Accounts payable - other 210,000 Retain payable ,000 389,359 599,359 Due to other funds 15,117 5,556 20,673 Other accrued liabilities 15, _ 10,000 10,000 Deferred revenue 381,563 633,368 1,014,931 Total Liabilities Fund Balances: Reserved for: 644,839 644,839 Capital projects 644,839 Center Place operating Unreserved & Undesignated: 1,353,779 1,353,779 Special Revenue Funds - - Debt Service Fund _ 1,725,182 1,725,182 Capital Projects Funds Total Fund Balances 2,337,184 1,725,182 4,062,366 - Total Liabilities and Fund Balances $ 2,718,747 $ - $ 2,358,550 $5,077,297 See accompanying accountants'compilation report. 1 City of Spokane Valley, Washington Combining Balance Sheet 1 Non-major Special Revenue Funds December 31, 2007 Arterial Trails& Hotel Center Place Street Paths Motel Reserve Fund Fund Fund Fund Assets Cash and cash equivalents $ 798,971 $ 33,665 $ 529,391 $ 337,416 Taxes receivable - - 31,377 - Accounts receivable, (net) - - - - Interest receivable 2,724 79 1,888 1,150 Due from other funds 19,400 - - - Total Assets $ 821,095 $ 33,744 $ 562,656 $ 338,566 Liabilities and Fund Balances Liabilities: Accounts payable $ - $ - $ 156,446 $ - Due to governmental agencies - - - - Due to other funds 210,000 - - - Other accrued liabilities - - 15,117 - Total Liabilities 210,000 - 171,563 - Fund Balances: Reserved for: Capital projects 611,095 33,744 - - CenterPlace operating - - - 338,566 Unreserved & Undesignated: Special Revenue Funds - - 391,093 - ' I Total Fund Balance 611,095 33,744 391,093 338,566 Total Liabilities and Fund Balances $ 821,095 $ 33,744 $ 562,656 $ 338,566 i 1 I See accompanying accountants'compilation report. continued I 1 City of Spokane Valley, Washington Combining Balance Sheet Non-major Special Revenue Funds December 31, 2007 Winter Weather Civic Facilities Total Non-major Reserve Replacement Special Revenue Fund Fund Funds Assets Cash and cash equivalents $ 559,522 $ 399,894 $ 2,658,859 - 31,377 Taxes receivable - Accounts receivable, (net) - 1,363 9,111 Interest receivable - 19,400 - Due from other funds _ Total Assets $ 561,429 $ 401,257 $ 2,718,747 Liabilities and Fund Balances Liabilities: $ $ 156,446 Accounts payable $ - Due to governmental agencies - -Due to other funds - - 210,000- - Other accrued liabilities - 381,563 Total Liabilities • Fund Balances: Reserved for: 644,839- - Capital projects - - 338,566 CenterPlace operating Unreserved & Undesignated: Special Revenue Funds 561,429 401,257 1,353,779 Total Fund Balance 561,429 401,257 2,337,184 Total Liabilities and Fund Balances $ 561,429 $ 401,257 $ 2,718,747 See accompanying accountants'compilation report. 'ity of Spokane Valley, Washington ombining Balance Sheet on-major Capital Project Funds ecember 31, 2007 i I Mirabeau Pt. Capital Street Bond CD Block Barker Parks Total Non-major Capital Projects Grants Capital Grant Bridge Capital Projects Capital Projects Fund Fund Fund Fund Fund Fund Funds ;sets ash and cash equivalents $ 395,269 $ 33 $ - $ - $ 5,558 $ 1,047,427 $ 1,448,287 fixes receivable - - - - - - - :counts receivable, (net) - 60,502 - - - - 60,502 :crest receivable 1,242 - - - - 3,297 4,539 fie from other funds - 156,000 - - - - 156,000 ants receivable - 98,999 - - 194,372 395,851 689,222 rota!Assets $ 396,511 $315,534 $ - $ - $199,930 $ 1,446,575 $ 2,358,550 abilities and Fund Balances abilities: counts payable $ - $ 86,172 $ - $ - $ 49,995 $ 74,921 $ 211,088 tainage payable - 17,365 - - - - 17,365 e to other funds - 216,938 - - 147,421 25,000 389,359 ler accrued liabilities - 2,424 - - 2,514 618 5,556 ferred revenue - 10,000 - - - - 10,000 ota/Liabilities - 332,899 - - 199,930 100,539 633,368 nd Balances: reserved& Undesignated: :apital Projects Funds 396,511 17,365 ( ) - - 1,346,036 1,725,182 btal Fund Balance 396,511 (17,365) - - - 1,346,036 1,725,182 tai Liabilities and Fund Balances $ 396,511 $315,534 $ - $ - $199,930 $ 1,446,575 $ 2,358,550 i I accompanying accountants'compilation report I City of Spokane Valley, Washington Combining Statement of Revenues, Expenditures and Changes in Fund Balances Non-major Governmental Funds For the Year Ended December 31, 2007 Nonmajor Nonmajor Nonmajor Total Nonma or Special Debt Capital J Revenue Service Projects Governmental Funds Fund Funds Revenues $ 461,578 Taxes $ 461,578 $ Licenses and permits - - - 1,224,558 Intergovernmental revenues 8,146 409,545 806,867- Charges for services - Fines and forfeitures 72,652 193,747 121,095 72,65172,652 193,747 Investment interest 19,400 Miscellaneous revenues Total Revenues 610,219 409,545 1,029,110 2,048,874 Expenditures Current: - General government - _ - - Public safety - - - Physical environment .. - Transportation _ 483,506 - Economic environment 483,506 .._ Culture and recreation Debt service: 185,000 - 185,000 Principal retirement 411,035 - 411,035 Interest expense Capital Outlay: 679,263 679,263- Capital expenditures 1,025,897 1,025,897 Construction in progress Total Expenditures 483,506 596,035 1,705,160 2,784,701 Excess (Deficiency) of Revenues 126,713 (186,490) (676,050) (735,827) Over(Under) Expenditures Other Financing Sources Transfers In 397,000 186,490 640,019 ,223,509) Transfers(out) (230,019) Total Other Financing Sources 166,981 186,490 640,019 993,490 Net Change in Fund Balances (deficit) 293,694 - (36,031) 257,663 1,761,213 3,804,703 Fund Balances Beginning of Year 2,043,490 Fund Balances End of Year $2,337,184 $ - $ 1,725,182 $ 4,062,366 See accompanying accountants'compilation report. City of Spokane Valley, Washington , I Combining Statement of Revenues, Expenditures and Changes in Fund Balances Non-major Special Revenue Funds For the Year Ended December 31, 2007 1 Arterial Trails & Hotel Center Place Street Paths Motel Reserve Fund Fund Fund Fund Revenues Taxes $ - $ - $ 461,578 $ - Licenses and permits - - - - Intergovernmental revenues - 8,146 - - Charges for services - - - - Fines and forfeitures - - - - Investment interest 45,111 1,036 24,786 17,269 Miscellaneous revenues 19,400 - - - Total Revenues 64,511 9,182 486,364 17,269 Expenditures Current: I General government - - - - Public safety - - - - Physical environment - - - - I Transportation - - - - I Economic environment - - 483,506 - Culture and recreation Debt service: Principal retirement - _ - Interest expense - - - Capital Outlay: Capital expenditures - - - - Construction in progress - - - - Total Expenditures - - 483,506 - 1 Excess (Deficiency) of Revenues 64,511 9,182 2,858 17,269 i Over(Under) Expenditures Other Financing Sources Transfers in - - - - 1 Transfers (out) (230,019) - - - Total Other Financing Sources (230,019) - - - I Net Change in Fund Balances(deficit) (165,508) 9,182 2,858 17,269 I I Fund Balances Beginning of Year 776,603 24,562 388,235 321,297 i Fund Balances End of Year $ 611,095 $ 33,744 $ 391,093 $ 338,566 See accompanying accountants'compilation report. - continued City of Spokane Valley, Washington Combining Statement of Revenues, Expenditures and Changes in Fund Balances Non-major Special Revenue Funds For the Year Ended December 31, 2007 Total Winter Weather Civic Facilities Non-major Reserve Replacement Special Revenue Fund Fund Revenues $ $ $ 461,578 Taxes _ - " Licenses and permits - 8,146 Intergovernmental revenues - Charges for services - - - Fines and forfeitures 28,636 4,257 121,095 Investment interest 11,095 Miscellaneous revenues 28,636 4,257 610,219 Total Revenues Expenditures Current: - General government _ - - Public safety _ - - Physical environment - - - Transportation - - 483,506 Economic environment - _ Culture and recreation - - Debt service: _ - - Principal retirement - - - Interest expense Capital Outlay: - - Capital expenditures - - - Construction in progress - 483,506 Total Expenditures Excess (Deficiency) of Revenues 28,636 4,257 126,713 Over(Under) Expenditures Other Financing Sources 397,000 397,000 Transfers in _ (230,019) Transfers (out) 397,000 166,981 - Total Other Financing Sources Net Change in Fund Balances 28,636 401,257 293,694 Fund Balances Beginning of Year 532,793 - 2,043,490 Fund Balances End of Year $ 561,429 $ 401,257 $ 2,337,184 See accompanying accountants'compilation report. ity of Spokane Valley, Washington )mbining Statement of Revenues, Expenditures and Changes in Fund Balances 1 ,n-major Capital Projects Funds r the Year Ended December 31, 2007 Mirabeau Pt. Capital Street Bond CD Block Barker Parks Total Non-major , Capital Projects Grants Capital Grant Bridge Capital Projects Capital Projects Fund Fund Fund Fund Fund Fund Funds venues (es $ - $ - $ - $ - $ - $ - $ - anses and permits _ - - - - - _ ?rgovernmental revenues - 202,529 - - 355,428 248,910 806,867 arges for services - - - _ - - _ es and forfeitures _ - - _ - - - astment interest 19,097 - - - - 53,555 72,652 cellaneous revenues - 1200 - - - 148,391 149,591 otal Revenues 19,097 203,729 - - 355,428 450,856 1,029,110 oenditures rent: feral government - - _ - - - - h o safety _ _ - - - - - 'sical environment _ - _ - _ - - nsportation _ - - - - - - nomicenvironment _ _ - _ - - `.ure and recreation _ - - _ _ - - At service: 'rincipal retirement - - - _ - - - iterest expense - - - - - - - lital Outlay: :apital expenditures - 679,263 679,263 onstruction in progress 36,933 451,113 - - 355,428 182,423 1,025,897 Val Expenditures 36,933 451,113 - - 355,428 861,686 1,705,160 ess(Deficiency)of Revenues (17,836) (247,384) - - - (410,830) (676,050) Over(Under)Expenditures _ er Financing Sources isfers in - 230,019 - 410,000 - 640,019 isfers(out) - - - - - - _ it Other Financing Sources - 230,019 - - - 410,000 640,019 t Change in Fund Balances(deficit) (17,836) (17,365) - - - (830) (36,031) I I 1 Balances Beginning of Year 414,347 - .. - - 1,346,866 1,761,213 'd Balances End of Year(deficit) $ 396,511 $ (17,365) $ - $ - $ - $ 1,346,036 $ 1,725,182 I ccompanying accountants'compilation report. City of Spokane Valley, Washington Schedule of Revenues, Expenditures and Changes in Fund Balances Budget and Actual Arterial Street and Trails&Paths Non-major Special Revenue Funds For the Year Ended December 31, 2007 Arterial Street Trails &Paths Special Revenue Fund S•ecial Revenue Fund Variance with Variance with Final Budgeted Actual Final Budget Final Budgeted Actual Final Budget Amounts Amounts Over(Under) Amounts Amounts Over(Under) Revenues Taxes $ - $ - $ - $ $ - $ (880000) 5,000 8,146 3,146 Intergovernmental revenues 880,000 , 1,036 1,036 32,000 45,111 13,111 (16,000) Miscellaneous Investment interest revenues 19,400 19,400 16,000 Miscellaneous revenues 182 (11,818) Total Revenues 912,000 64,511 (847,489) 21,000 g Expenditures - _- -Current: - - General government - _ - - - Physical environment - - - - Culture and recreation - - - - Debt service: - Principal retirement - - - - Interest expense (21,000) Capital Outlay: 912,000 (912,000) 21,000 Capital expenditures - (21,000) Construction in progress 812,000 (912,000) 21,000 Total Expenditures 9 182 Excess(Deficiency)of Revenues 64,511 64,511 - 8'182 Over(Under)Expenditures Other Financing Sources -- - - - Transfers In (230,019) (230,019) -Transfers (out) (230,019) (230,019 - - Total Other Financing Sources (230, 9,182 - Net Change in Fund Balances (165,508) (165,508) 9,182 776,603 776,603 - 24,562 24,562 Fund Balances Beginning of Year 9,182 Fund Balances End of Year(deficit) $ 776,603 $ 611,095 $ 165,508 $ 24,562 $ 33,744 $ See accompanying accountants'compilation report 1 City of Spokane Valley, Washington Schedule of Revenues, Expenditures and Changes in Fund Balances Budget and Actual Hotel/Motel and Center Place Reserve Non-major Special Revenue Funds For the Year Ended December 31, 2007 Hotel/Motel Center Place Reserve Special Revenue Fund Special Revenue Fund Variance with Variance with Final Budgeted Actual Final Budget Final Budgeted Actual Final Budget Amounts Amounts Over(Under) Amounts Amounts Over(Under) Revenues Taxes $ 400,000 $ 461,578 $ 61,578 $ - $ - $ - Intergovernmental revenues - - - - _ - Investment interest 8,000 24,786 16,786 10,000 17,269 7,269 Miscellaneous revenues 250,000 - (250,000) 315,000 - (315,000) Total Revenues 658,000 486,364 (171,636) 325,000 17,269 (307,731) Expenditures Current: General government - - _ - - - Economic environment 618,000 483,506 (134,494) - - - Culture and recreation - - - 325,000 - (325,000) Debt service: _ - - _ - - Principal retirement Interest expense - - - - - - Capital Outlay: Capital expenditures - - - - - - Construction in progress _ - _ _ - - Total Expenditures 618,000 483,506 (134,494) 325,000 - (325,000) Excess(Deficiency) of Revenues 40,000 2,858 (37,142) - 17,269 17,269 Over(Under)Expenditures Other Financing Sources Transfers In _ - _ - - - Transfers(out) (40,000) - 40,000 - - - Total Other Financing Sources (40,000) - (40,000) - - - Net Change in Fund Balances - 2,858 2,858 - 17,269 17,269 Fund Balances Beginning of Year 388,235 388,235 - 321,297 321,297 - Fund Balances End of Year $ 388,235 $ 391,093 $ 2,858 $ 321,297 $ 338,566 $ 17,269 I 1 1 See accompanying accountants'compilation report • City of Spokane Valley, Washington Schedule of Revenues, Expenditures and Changes in Fund Balances Budget and Actual Winter Weather Reserve and Civic Facilities Replacement Non-major Special Revenue Funds For the Year Ended December 31, 2007 • Winter Weather Reserve Civic Facilities Replacement Special Revenue Fund Special Revenue Fund Variance with Variance with Final Amou fisted Amounts Over(Under) Final fisted Amounts Over(U Revenues - $ _ - Taxes $ - interest 4,257 4,257 Intergovern revenues 20,000 28,636 8,636 - Investment interest 000 (520,000)520, Miscellaneous revenues 4 257 4,257 Total Revenues 540,000 28,636 (511,364) Expenditures Current: - - - - General government 540,000 - (540,000) - - Transportation - - - Economic environment _ - - Culture and recreation - - Debt service: _ - Principal retirement - - - Interest expense (397,000) Capital Outlay: 397,000- Capital expenditures - (397,000) (387,000) 540,000 Construction in progress (540,000) 397,000 Total Expenditures 4 257 401,257 Excess(Deficiency) of Revenues 28,636 28,636 (397,000) Over(Under)Expenditures Other Financing Sources 397,000 397,000 - - -Transfers In _ - - Transfers(out) _ _ 397,000 397,000 Total Other Financing Sources 401,257 401,257-28636 28,636 Net Change in Fund Balances , _ 532,793 532,793 Fund Balances Beginning of Year - $ 401,257 $ 401,257 Fund Balances End of Year $ 532,793 $ 561,429 $ 28,636 $ • See accompanying accountants'compilation report. City of Spokane Valley, Washington Schedule of Revenues, Expenditures and Changes in Fund Balances Budget and Actual Debt Service Non-major Fund For the Year Ended December 31, 2007 Debt Service Fund Variance with Final Budgeted Actual Final Budget Amounts Amounts Over(Under) Revenues Taxes $ - $ - $ - Intergovernmental revenues 414,000 409,545 (4,455) Investment interest - Miscellaneous revenues _ - Total Revenues 414,000 409,545 (4,455) Expenditures Current: General government _ - Transportation _ - Economic environment _ _ - Culture and recreation Debt service: Principal retirement P 185,000 185,000 Interest expense 415,000 411,035 (3,965) Capital Outlay: Capital expenditures _ _ - Construction in progress Total Expenditures 600,000 596,035 (3,965) Excess(Deficiency)of Revenues (186,000) (186,490) (490) Over(Under)Expenditures Other Financing Sources Transfers In 186,000 186,490 (490) Transfers(out) Total Other Financing Sources 186,000 186,490 (490) Net Change in Fund Balances _ _ - Fund Balances Beginning of Year _ _ - Fund Balances End of Year $ - $ $ _ See accompanying accountants'compilation report City of Spokane Valley, Washington Schedule of Revenues, Expenditures and Changes in Fund Balances Budget and Actual Mirabeau Point and Capital Grants Non-major Capital Projects Funds For the Year Ended December 31, 2007 Mirabeau Point Capital Grants Capital Projects Fund Capital Projects Fund Variance with Variance with Final Budgeted Actual Final Budget Final Budgeted Actual Final Budget Amounts Amounts Over(Under) Amounts Amounts Over(Under) Revenues $ _ $ _ $ - $ - $ Taxes $ 425,000 - (425,000) 7,630,000 202,529 (7,427,471) Intergovernmental revenues _ - - Investment interest 16,000 19,097 3,097 1,200 1,200 Miscellaneous revenues Total Revenues 441,000 19,097 (421,903) 7,630,000 203,729 (7,426,271) Expenditures Current: -- - - General government - - - _ - - Transportation - - - - - Economic environment - _ - - - -Culture and recreation - _ _ Debt service: _ - Principal retirement - _ - - Interest expense Capital Outlay: Capital expenditures Construction in progress 441,000 36,933 (404,067) 9,300,000 451,113 (8,848,887) Total Expenditures 441,000 36,933 (404,067) 9,300,000 451,113 (8,848,887) Excess(Deficiency)of Revenues (17,836) (17,836) (1,670,000) (247,384) 1,422,616 Over(Under) Expenditures Other Financing Sources 1,670,000 230,019 (1,439,981) - -- Transfers In - _ - - - Transfers(out) Total Other Financing Sources - - - 1,670,000 230,019 (1,439,981) - Net Change in Fund Balances (17,836) (17,836) - (17,365) (17,365) - Fund Balances Beginning of Year 414,347 414,347 - - Fund Balances End of Year(deficit) $ 414,347 $ 396,511 $ (17,836) $ $ (17,365) $ (17,365) See accompanying accountants'compilation report City of Spokane Valley, Washington Schedule of Revenues, Expenditures and Changes in Fund Balances j Budget and Actual 1 Street Bond and CD Block Grant Non-major Capital Projects Funds For the Year Ended December 31, 2007 Street Bond CD Block Grant Capital Projects Fund Capital Projects Fund Variance with Variance with Final Budgeted Actual Final Budget Final Budgeted Actual Final Budget Amounts Amounts Over(Under) Amounts Amounts Over(Under) Revenues Taxes $ - $ - $ - $ - $ - $ - Intergovernmental revenues - - - - - - Investment interest 16,000 - (16,000) - - - Miscellaneous revenues - - - - - - Total Revenues 16,000 - (16,000) - - - Expenditures Current: General government - - - - - - Transportation - - - - - - Economic environment - - - - - - Culture and recreation - - - - - - Debt service: - - - - - - Principal retirement Interest expense - - - - - - Capital Outlay: Capital expenditures - - - - _ - Construction in progress - - - - - - 1 Total Expenditures - - - - - - i Excess(Deficiency)of Revenues 16,000 - (16,000) - - - Over(Under)Expenditures Other Financing Sources Transfers In - - - - - - Transfers(out) (816,000) - 816,000. - - - Total Other Financing Sources (816,000) - (816,000) - - - - Net Change in Fund Balances (800,000) - 800,000 - - - Fund Balances Beginning of Year 800,000 - (800,000) - • Fund Balances End of Year(deficit) $ - $ - $ • $ - $ - $ - I See accompanying accountants'compilation report City of Spokane Valley, Washington Schedule of Revenues, Expenditures and Changes in Fund Balances Budget and Actual Barker Bridge and Parks Non-major Capital Projects Funds For the Year Ended December 31, 2007 Parks Barker Bridge Capital Projects Fund Ca•ital Projects Fund Variance with Variance with Final Budgeted Actual Final Budget Final Budgeted Actual Final Budget Amounts Amounts Over(Under) Amounts Amounts Over Revenues $ $ $ $ $ - $ 2,650,000 248,910 (2,401,090) Taxes 700,000 355,428 (344,572) 48,910 13,555 Intergovernmental stmniterestevenues - - 40,000 Investment interest 148,391 148,391 Miscellaneous revenues Total Revenues 700,000 355,428 (344,572) 2,690,000 450,856 (2,239,144) Expenditures Current: - General government -- Transportation - _ - - _ -- Economic environment -- Culture and recreation - -- Debt service: - - Principal retirement - - Interest expense 3550000 679,263 (2,870,737) Capital Outlay: - - , , 182,423 182,423 Capital expenditures 700,000 355,428 (344,572) Construction in progress 700,000 355,428 (344,572) 3,550,000 861,686 ( Total Expenditures (860,000) (410,830) 449,170 Excess(Deficiency) of Revenues Over(Under)Expenditures Other Financing Sources - - 860,000 410,000 (450,000) - Transfers In - - - Transfers(out) - - 860,000 410,000 (450 000) Total Other Financing Sources (830) (830) - Net Change in Fund Balances _ 1,346,866 1,346,866 Fund Balances Beginning of Year $ $ $ 1,346,866 $ 1,346,036 83U) Fund Balances End of Year(deficit) $ See accom t anying accountants'compilation retort City of Spokane Valley, Washington Comprehensive Annual Financial Report- Fiscal Year 2007 This page is intentionally blank. iI I ! City of Spokane Valley, Washington Comprehensive Annual Financial Report Fiscal Year 2007 Internal SeMce Funds Internal service funds: are used to account for the financing of goods, services, and operations provided by one department or agency to other departments or agencies of the government and it's other governmental units, on a cost reimbursement basis. Equipment Rental&Replacement Fund The City of Spokane Valley's Equipment Rental&Replacement Fund (ER&R) accounts for the activities and costs of maintaining and replacing the City's vehicles and equipment for all City departments.The fund accumulates resources for vehicle and equipment replacements and purchases. Funds or Departments within using the vehicle or equipment, pay associated replacement fees. Replacement funds are collected on the telephone system, computer network system,desktop computers, and vehicles. Maintenance and service charges for copiers,telephones, and Internet are also charged to the funds. The ER&R Fund also finances and administers a fleet of pool cars for use by City Departments. Risk Management Fund The City of Spokane Valley's Risk Management Fund has been established to account fr insurance cos, claims fund also o accounts for the funding of utnlemploymentaclaims through the rSe e of Washingtone program.This City of Spokane Valley, Washington Combining Statement of Net Assets-Internal Service Funds Equipment Rental and Replacement& Risk Management Funds For the Year Ended December 31, 2007 Governmental-type activities Equipment Rental and Risk Replacement Management Fund Fund Totals Assets Current Assets: Cash and cash equivalents $ 879,723 $ 15,384 $ 895,107 Accounts receivable, (net) - - - Interest receivable 2,612 50 2,662 Due from other funds - - - TotalCurrentAssets 882,335 15,434 897,769 Total Assets $ 882,335 $ 15,434 $ 897,769 Liabilities Current Liabilities: Accounts payable $ 14,490 $ - $ 14,490 Due to other governments - - • Total Current Liabilities 14,490 14,490 Total Liabilities 14,490 - 14,490 Net Assets Unrestricted 867,845 15,434 883,279 Total Net Assets 867,845 15,434 883,279 Total Liabilities and Net Assets $ 882,335 $ 15,434 $ 897,769 • See accompanying accountants'compilation report City of Spokane Valley, Washington Combining Statement of Revenues, Expenses, and Changes in Fund NetAssets Equipment Rental and Replacement& Risk Management-Internal Service Funds For the Year Ended December 31, 2007 Governmental-t a activities Equipment Rental and Risk Replacement Management Totals Fund d Operating Revenues: Charges for services (net of returns and allowances) _- $ - $ - - Miscellaneous revenues Total Operating Revenues Operating Expenses: - Personal services _ Professional services 5,117 181,225 _ 1 4- Other services and expenses 117 g 225 186 342 Total Operating Expenses (181,225) (186,342)of Revenue over(under) Expenses —� Rion-Operating Revenues (Expenses) 2,612 810 3,422 Investment income Intergovernmental revenues Total Non-Operating Revenues (Expenses) -- - (180,415) (182 Income before contributions and transfers -- Contributions and Transfers: 176,903 176,903- Transfers (257,564) - (257,564) Transfers(out) - Capital contributions ontruton gq) Total contributions and transfers 176,903 (80,661) 9) (3,512) (26 Change in Net Assets (deficit) Net Assets Beginning of Year 1,127,914 _ 15,946 1 — Net Assets End of Year $�79 See accompanying accountants'compilation report 1 ■ City of Spokane Valley, Washington. I Combining Statement of CashFlows-Internal Service Funds Equipment Rental and Replacement& Risk Management-Internal Service Funds For the Year Ended December 31, 2007 Governmental -Type Activities j Internal Service Funds Equipment Rental Risk and Replacement Management Fund Fund Totals Cash Flows from Operating Activities Receipts from internal activity-interfund services provided $ 42,815 $ (3,203) $ 39,612 Cash payments to suppliers for goods and services 8,098 (181,225) (173,127) Net cash provided(used) by operating activities 50,913 (184,428) (133,515) Cash Flows from Noncapital Financing Activities Transfers to other funds (out) (257,564) 176,903 (80,661) Net Cash (used)provided by noncapital related financing activities (257,564) 176,903 (80,661) I Cash Flows from Capital and Related Financing Activities Depreciable capital assets net of accumulated depreciation transferred to governmental funds 257,563 - 257,563 Net Cash provided by capital related financing activities 257,563 - 257,563 ! Cash Flows from Investing Activities Interest received 2,612 810 3,422 Net Cash provided by investing activities 2,612 810 3,422 Net Increase (decrease) in Cash and Cash Equivalents 53,524 (6,715) 46,809 Cash and Cash Equivalents-January 1, 2007 826,199 22,099 848,298 Cash and Cash Equivalents- December 31, 2007 $ 879,723 $ 15,384 $ 895,107 Reconciliation of Operating Income to Net Cash Provided by Operating Activities: Operating Income (Loss) $ (5,117) $ (181,225) $ (186,342) Adjustments to reconcile operating income to net cash provided by operating activities: (Increase) Decrease in Assets: Interest receivable (2,612) (50) (2,662) Due from other funds 45,427 - 45,427 Increase (Decrease)in Liabilities: Accounts Payable 13,422 - 13,422 Due to other governments - (3,153) (3,153) f j Deposits and other payables (207) - (207) Total adjustments 56,030 . (3,203) 52,827 1 Net Cash Provided (used) by Operating Activities $ 50,913 $ (184,428) $ (133,515) See accompanying accountants'compilation report City of Spokane Valley, Washington Comprehensive Annual Financial Report Fiscal Year 2007 This pages intentionally blank